Tuesday, February 21, 2012

Daily Market Trend Guide -- Tuesday, February 21, 2012

MARKET TREND FOR TODAY                                                     February 21, 2012
The Markets continued to end the day with gains but showed some signs of weariness as it ended the day after coming off its highs. The Markets opened strong on Friday and gave its intraday high of 5606.70 and then continued to trade in a capped range until afternoon trade. The Markets pared much of its gains in the late afternoon trade and ended the day after coming off its highs at 5564.30, posting yet another moderate gain of 42.35 points or 0.77%. With this, it has formed a sharply higher top and higher bottom on the Daily High Low charts and has ended the week with net gains of 182.70 points or 3.37%.

For today, expect a quiet start in the Markets. The Markets are expected to open on a quiet note and are likely to consolidate. With the Markets coming off its highs on Friday and with a quiet and moderately lower start expected the levels of 5610 shall act as immediate top for the Markets and we have to see again if it corrects or consolidates here.

For today, the levels of 5580 and 5610 shall act as resistance and the support comes in at as slow as 5450 and 5410 levels.

All lead indicators continue to remain overbought. The RSI—Relative Strength Index on the Daily Chart is 78.3258 and continues to remain grossly overbought. It has reached its highest value in last 14-days and is bullish. However, it does not show any negative or positive divergence. The Daily MACD continues to trade above its signal line. On the Weekly Charts, the RSI is 61.4697 and that too has reached its highest value in last 14-weeks. 

Having said this, it would be important to see that the Markets consolidates or corrects at these levels. This is because, whatever the weekly charts say, the Daily Charts are very much overstretched and the lead indicators are grossly overbought. Further to this, this is expiry week and we are also likely to see the Markets remaining dominated with rollover activities. 

All and all, we continue to advice high degree of caution. The Markets behaviour on the upside has been quite erratic, the market breadth negative on Friday and with quiet start today, any unabated rally would get dangerous with each passing day and the correction would remain imminent and long overdue. Overall, cautious approach to the Markets advised for today with protection of profits at current levels.

Milan Vaishnav,
Consulting Technical Analyst,