MARKET TREND FOR TODAY
May 14, 2013
The Markets yesterday finally took a hit on its chin as it
saw much awaited and long overdue correction
setting in after few days of prolonged up move as it ended the day with deep
losses. The Markets opened on a negative note and remained negative throughout
the session as it went on to take further cuts. After opening on the negative,
the Markets traded the morning session with capped losses. However, after the
morning trade, these loses kept on widening as the Markets kept making news
lows after forming a downward trajectory until the end. It went on to give the
day’s low of 5972.90 towards the end of the session. No recovery was seen even
towards the end and the Markets finally ended the day at 5980.45, taking a deep
cut of 126.80 points or 2.08% while forming a lower top and sharply lower
bottom on the Daily High Low Charts.
Technically speaking, since the Markets have ended the day
at the low point, it is likely to open negative and continue with its
corrective activities. However, we can expect the Markets to open on a flat
note and look for directions. Heavy delivery based offloading was reported
yesterday and therefore there are bright chances that the Markets continue to
see its corrective activities.
For today, the levels of 6025 and 6040 are likely to act as
resistance on the upside. The supports come in at 5940 and 5885 levels.
Lead indicators continue to show bearish and downward bias.
The RSI—Relative Strength Index on the Daily Chart is 57.0868 and it has just
crossed below from a topping formation. This is bearish. Further, RSI has set a
new 14-day low and this too is bearish indication. Also, RSI has set a new
14-day low whereas NIFTY has not yet and this is Bearish Divergence. The Daily
MACD, however, continues to trade above its signal line.
On the derivative front, NIFTY has shed over 11.98 lakh
shares or 5.32% in Open Interest. This very
clearly suggests that a serious unwinding has been done even in the derivative segments and no shorts are
being seen built up.
As per the Cash Market figures, there is been increase in
delivery based volume in all key NIFTY components as they declined. This very
clearly shows that delivery based selling was seen in the cash markets in heavy
volumes. Under such circumstances, one usually observes increase in Open
Interest in derivative segment. This means that usually delivery based selling
is supported by shorts in the derivative segment. But this time, it is not so. Even the derivative segment has seen heavy
shedding of Open Interest. This signifies that even with the delivery based
selling in the cash segment, no shorts have been created in the derivative
segment and the derivative segment has also seen unwinding as well.
All and all, there are no indications that the Markets would
find support nearby. We are likely to see continuation of the corrective trend,
at least in the immediate short term. Even if we see some up move, in form of a
technical pullback, it is all likely to a dead cat bounce and the Markets may
start coming off again after some pullback. We continue to advice not to create
any aggressive long positions even with this fall as weakness might continue.
Fresh positions should be taken very selectively and profits should be
vigilantly protected on either side. Cautious outlook is continued to be
advised for today.
Milan Vaishnav,
Consulting Technical Analyst,
+91-98250-16331
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