Monday, May 7, 2012

Daily Market Trend Guide -- Monday, May 07, 2012

MARKET TREND FOR TODAY                                                         May 7, 2012
The Markets had a very disappointing end to the Week  as the rising Rupee, uncertainty on the GAAR issues, some unfavorable cues from Europe caused the Markets to end the day with good amount of cut. The Markets opened negative and after remaining in capped range for half of the session, saw the cut getting deeper, although on very low volumes and went on to give the day’s low of 5070.60. It finally ended the day at 5086.85, posting a net loss of 101.55 points or 1.96%. It formed a lower top and lower bottom on the Daily High Low Charts and with this, the Markets have ended the week with net loss of 122.15 points or 2.35%.

Today’s session remain critically important for the Markets . The Markets shall be affected by more number of non-technical factors than technical factors and the contradiction between the two continues to exist. The F&O statistics very clearly show the potential of bottoming out in the very immediate term whereas some non-technical factors point towards volatility to continue.

Expect the Markets to open on a lower note and look for directions and the intraday trajectory would continue to be critically important. The levels of 5117 and 5170 shall act as resistance and the levels of 5050 and 5020 shall act as support.

The RSI—Relative Strength Index on the Daily Chart is 36.5158 and it has reached its lowest value in last 14-days which is bearish but it does not show any negative divergence. The Daily MACD continues to remain below its signal line. The similar pattern appears on the Weekly Charts.

Having said this, there are very few important points that needs to be noted. As against the outflow of over 1200 Crores by the FIIs in the last month, this month of May has seen net purchases to the tune of 876 Crores by the FIIs despite the fall. Further, the NIFTY has ended the day with addition in open interest. The third, but most important point is that the Markets are still within the support filters of its important support and there are ALL chances that this is maintained at the Close levels. Further to this, with the Finance Bill going into discussion in Parliament today, the clarifications that are expected from the FM are important as most of the negatives are factored in the pricing. Also, the crude trades at its 4-month lows and this is certainly a good macro indicator.

GOING B Y THE ABOVE, over and above the technical factors that the Markets have attempted to give a downward breakout, it is important that we take the above factors into consideration also. There are all chances that we see a gap down opening today, but recover from the opening lows ahead in the session and the Markets stays in its support filters. It is very clearly advised and strongly reiterated that retail investors should AVOID shorts and aggressive positions in the Markets while maintaining liquidity as Markets are governed by non-technical factors. The existing positions should patiently be held on to and once some intermediate bottoms are seen, some selective purchases may be made. Until that happens, the existing positions may patiently be held on to and liquidity should be maintained. We again reiterate that shorts should be avoided. Overall cautious outlook is advised for today.

Milan Vaishnav,
Consulting Technical Analyst,
+91-98250-16331


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