MARKET TREND FOR
TODAY
May 20, 2013
Despite continuing negative divergence on the Daily Charts,
the Markets continued to end the day with moderate gains again after spending the
entire session consolidating in the negative territory. The Markets opened on
the moderately positive note but soon dipped into the red after initial seconds
of the trade. Thereafter, it continued to move in a narrow range with capped
losses for the most part of the session. It moved in 30-odd points range in the
negative territory as it gave its intraday low of 6146.15 in the second half of
the session. However, the Markets saw some spurt in last hour of the trade as
it not only recouped its entire day’s losses but managed to move back into the
green. It went on to give the day’s high of 6199.95 towards the end of the
session. It finally ended the day at 6187.30, posting a net gain of 17.40
points or 0.28% while continuing to form a higher top and higher bottom on the
Daily High Low Charts.
Before we begin for today, we would like to begin with
pointing out that the negative divergence continues on the Daily Charts. The
Markets are likely to see a modestly positive opening again, but at the same
time, we would like to strongly reiterate that given the continuing bearish
divergence on the Daily Charts, the Markets are due and set for long pending
correction. The technicals are highly unhealthy for the Markets to continue the
up move in this manner and correction from higher levels just cannot be ruled
out for now.
For today, the levels of 6215 and 6225 are immediate
resistance levels on the charts while the supports come in much lower at 6120
and 6075 levels.
The lead indicators continue to point towards the rise
getting unhealthy and they clearly point negative divergences on the Daily
Charts. The RSI—Relative Strength Index on the Daily Chart is 68.4886 and it
shows no failure swings. But the NIFTY has set a new 14-day high but the RSI
has not, and this is a clear BEARISH DIVERGENCE. The Daily MACD continues to trade above its signal line but very
slowly, it moves towards negative crossover. On the Weekly Charts, the RSI is
64.5668 and it has just reached its highest value in last 14-weeks.The Weekly
MACD trades above its signal line.
On the derivative front, NIFTY May futures have not reported
any change in Open Interest as it added just 36,950 shares or 0.14% in open
interest. This signifies that there has been no major buying in the spurt that
we saw in the last hour of the trade on Friday.
Having said this, it is very important to know that the
Markets may show resilience at higher levels despite continuing bearish
divergence on the Daily Charts. This can occur mainly due to liquidity that
drives the Markets. However, as we have mentioned many times in our recent past
editions that such rise becomes unhealthy and ultimately technicals do take
over. In this case, we may see the Markets trading with modest up move in the
initial trade, but going strictly by technical charts, it is just a matter of
time that we see some correction coming in.
Under such circumstances, there are bright chances that we
may see a positive and stable opening again, but at the same time, possibility
of the correction setting in from higher levels just cannot be ruled out and
this probability remains very high, sooner or later. Given this reading, we
strongly advise against creating any long positions with such technical
reading. We strongly advice retail traders to maintain liquidity to preserve
current positions but strictly avoid creating fresh positions. It is advised to
approach the Markets with continuing high degree of caution.
Milan Vaishnav,
Consulting
Technical Analyst,
+91-98250-16331
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