MARKET TREND FOR TODAY January 30, 2012
The Markets on Friday continued its up move though in a visible reluctant manner while continuing to be in “overbought” condition and ended yet another day with gains and extending its “overbought” range. The Markets opened on a positive note and after trading in capped range pared all of its gains in the late morning trade to trade flat. It recovered again to inch up and ended the day at 5204.70, posting a gain of 46.40 point or 0.90%. In the process, it has formed a higher top and higher bottom on the Daily High Low Charts. The Markets have ended the week with net gains of 156.10 points or 3.06%.
For today, we can expect a long overdue correction to creep in. Today, expect the Markets to open on a lower note and trade in a range. The intraday trajectory would decide if the Markets shall consolidate or correct a bit with volumes continuing to play important role. The Markets have been moving upwards back on liquidity despite being in “overbought” range for some time, but such rise needs to get corrected / consolidated which would be in fact healthy in the long run. The Markets have resisted on Friday to its 200-DMA.
Today, the Daily Charts and Weekly Charts present a contradictory picture. The Daily Charts are heavily “overbought” whereas the Weekly Charts shows bullish signs but are seeing a major pattern resistance as shown below.
The RSI—Relative Strength Index on the Daily Chart is 75.8942 and it is in “overbought” range. Having said this, the technical reading on the Daily Charts very clearly suggests that the correction, which is long overdue is expected anytime. The Markets have risen nearly 600 points in last 14 sessions and this kind of rise, even though it is liquidity driven, gets unhealthy if it continues in the “overbought” range in this manner. Thus, a correction is overdue and it would be healthy for the Markets in the long run.
Overall, it is advised to refrain from making any fresh purchases and any profits on the long positions, especially in the NIFTY stocks should be very vigilantly protected as most of them too continue to trade in “overbought” range. Overall, cautious outlook is advised for today.
Milan Vaishnav,
Consulting Technical Analyst,
+91-98250-16331
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