MARKET TREND FOR TODAY February 16, 2012
The overbought markets saw a spate of short covering yesterday as it opened on a higher note, went on to give a breakout from the brief consolidation over last couple of sessions and went on to end the day near its highs, while positing robust gains as liquidity continued to chase the Markets. The Markets opened on a positive note and remained in the upward rising trajectory as it went on to give the intraday high of 5542.10. The Markets saw a brief profit taking, but went on to end near its highs at 5531.95 posting a robust gain of 115.90 points or 2.14%. The Markets have went on to give a sharply higher top and higher bottom on the Daily High Low Charts.
For today, expect the Markets to open on a moderately lower note and look for directions. The intraday trajectory would continue to remain the key decider of the trend and there are chances that the Markets consolidates yesterday’s gains.
It is important to note that though liquidity has been wildly chasing the Markets, they continue to remain terribly overbought. Majority of components of NIFTY and other sectoral Indices remain heavily overbought and thus any positions for the retail investor shall bring with it imminent risk of correction anytime. Statistically speaking, the resistance for today is expected at 5560 and 5590 and supports comes as low as 5450 and 5370 levels.
The RSI—Relative Strength Index on the Daily Chart is 77.9877 and is extremely Overbought. The Daily MACD continues to trade above its signal line. The NIFTY PCR is 1.61 as against 1.47.
Though the volumes have been much higher yesterday at 2.49 lakh crores, our advice for today would remain similar to what we have been advising since last couple of sessions. The Markets, though driven by liquidity, are being driven bit madly and has all the potential to trap the retain investor at high levels. Given the technicals, the correction stands imminent and overdue in the Markets. As a consultant, we have no methods to see when liquidity will stop chasing the Markets, but can surely read the technicals which shows the Markets and most of its components heavily “Overbought”. We, therefore, continue to reiterate our advice to the retail investors to stay away from taking aggressive positions. Any purchases should be highly selective and in the non-index components and highly stock specific. High degree of caution is advised for today.
Milan Vaishnav,
Consulting Technical Analyst,
+91-98250-16331
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