Daily Market Trend Guide -- Monday, May 21, 2012

MARKET TREND FOR TODAY                                                            May 21, 2012

The Oversold Markets opened lower on Friday, went on to dip further before it saw a remarkable recovery from its day’s low and finally ended the day with modest gains. The Markets opened lower on Friday and went on further to give the day’s low of 4788.95. However from the late morning trade, the Markets bottomed out and it transformed themselves into rising trajectory and remained in the upward rising channel till the end of the session. The Markets went on to recover all of its losses, came back into the green and went on to give the day’s high of 4908.50, recovering over 120-odd points from the day’s low. The Markets finally ended the day at 4891.85, posting a net gain of 21.25 points or 0.44%. The Markets have formed a lower top and bottom on the Daily High Low Charts and have ended the week with net loss of 37.45 points or 0.74%.

For today, we can expect to see a modest opening in the Markets with the Markets expected to open on a flat to mildly positive note and look for directions. There are chances that the Markets consolidates a bit after a 120-point rally from Friday’s lows. The key would be to see if the Markets consolidates and do not lose ground in order to capitalize Friday’s recovery and for this, the intraday trajectory would be critically important.

The levels of 4935 and 4990 are immediate resistance levels on the Charts and the levels of 4850 and 4810 are expected to act as immediate supports.

The RSI—Relative Strength Index on the Daily Chart is 32.0097 and it is neutral as it shows no negative divergence or failure swings. The Daily MACD continues to trade below its signal line. On the Candles, An engulfing bullish line occurred (where a white candle's real body completely contains the previous black candle's real body).  The engulfing bullish pattern is bullish during a downtrend (which appears to be the case with NIFTY).  It then signifies that the momentum may be shifting from the bears to the bulls.

On the Weekly Charts, RSI 40.1449 and it has reached its lowest value in last 14-days which is bearish. However, it does not show any failure swings.  The Weekly MACD continues to trade below its signal line. 

It is important to note that the Markets have taken intraday support at the 200-Week Moving Average as evident from the WEEKLY Chart given below.

From the above reading, the Markets shall continue to find support at the Friday’s lows. The overall technical reading and the F&O statistics which shows addition of Open Interest in both Stock and NIFTY futures suggest that the Markets are not likely to breach these lows. Also, it suggests a potential bottom formation at the Friday’s low levels. However this needs confirmation.

All and all, the consolidation and range bound movement is likely in the Markets and volatility is likely to stay. Stock specific activity is likely to continue and any downside can be utilized to make selective purchases. At the same time, profits should be protected and shorts should strictly be avoided. Overall, very light positions with cautious optimism is advised for the day and this week.

Milan Vaishnav,

Consulting Technical Analyst,

www.MyMoneyPlant.co.in

http://milan-vaishnav.blogspot.com

+91-98250-16331

milanvaishnav@mymoneyplant.co.in

milanvaishnav@yahoo.com