MARKET TREND FOR TODAY February 2, 2012
The Markets continued its up move yesterday after spending half of the session in the negative territory on back of some short covering again as it ended the day with modest gains. The Markets opened on a negative note as expected and traded with capped losses for the half of the session. The Markets remained negative until afternoon and also gave its intraday low of 5159. However the last two hours of the trade saw sharp short covering from the lower levels as the Markets went on to trade in positive moving past its 200-DMA to end the day at 5235.70, posting a net gain of 36.45 points or 0.70%. In the process, it has formed a higher top and higher bottom on the Daily High Low charts.
For today, expect the Markets to open into positive again and trade positive at least in the initial trade and then look for directions.
For today, expect the Markets to open into positive again and trade positive at least in the initial trade and then look for directions.
Having said this, we have few very important point to convey. Without going into the daily routine of stating support and resistance levels for the Markets, it would be more important to take note of few important points.
From last few sessions, the Markets have risen defying all technical indicators and other technical readings. As stated number of times in our previous editions, that even though the rally may be liquidity driven, the defiance of the technicals certainly makes the rise unhealthy and poses a threat of equally sharp correction. Further to this, we have noticed few prominent faces on the leading business channel commenting and recommending “buy calls” on certain highly operator driven stocks. These stocks have risen exactly to the extent spoken on the channel even though they have been in extremely OVERBOUGHT condition and this has been done in complete defiance of technicals. No technical or any other factor supported such movements. Such “successful prediction” is possible ONLY IF you are speaking on “behalf of” certain entities who have ultimate goal of offloading such shares at very high levels to the retail investors. As the time passes, the retail investors tend to get trapped at these higher prices. In older times, such tactics were used using the Print Media but now a days, electronic media is used. As a Consultant, it is our duty to draw your attention to such activities and prevent getting carried away with frenzied and dangerous buy calls.Same is the case with Markets today. The RSI—Relative Strength Index of the Markets on Daily Charts is 69.8588 and it shows no failure swing. But the NIFTY has given a 14-day high, whereas the RSI has not and this is BEARISH DIVERGENCE. The Daily MACD continues to remain above its signal line. Further to this, the NIFTY Futures have shown net decline of 563800 shares or 2.52% in net Open Interest. Therefore, there are no indications, technical or whatsoever nature that warrants and supports and sustains such unabated rise without any consolidation or correction, even if it is liquidity driven.
In light of the above, we strongly continue to recommend to refrain from aggressive buying and keep protecting profits at higher levels. There are chances that we may see a positive opening but the Markets transforms itself into negative trajectory and comes off its highs later in the day, if not today, then tomorrow as some consolidation / correction is long overdue and imminent for the healthy rise to sustain. Overall, very cautious outlook is advised for today.
Milan Vaishnav,
Consulting Technical Analyst,
+91-98250-16331
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