Wednesday, May 15, 2013

Daily Market Trend Guide -- Wednesday, May 15, 2013

MARKET TREND FOR TODAY                                                                  May 15, 2013
The Markets had a very range bound session yesterday as it moved in a very narrow band and showed no strength to give any recovery after day before yesterday’s knock of over 2% as it ended the day with moderate gains. The Markets opened on a mildly positive note and it soon dipped into the red to give the day’s low of 5970.05. However, it quickly made its bottom around those levels and started crawling back into the green. In the late morning trade itself, it went on to give the day’s high of 6026.20. It did not sustain its gain as it came off its lows in the afternoon trade to trade flat again. It showed no signs of attempting any recovery and spent the rest of the session trading in sideward manner. It finally ended the day at 5995.40, posting a moderate gain of 14.95 points or 0.25% while forming a sharply lower top but almost similar bottom on the Daily High Low Charts.


Today, we may see the Markets opening on a flat to mildly positive note and look for directions. Global Markets are trading positive after strong closing of US Markets overnight and this may aid to flat to mildly positive opening in our Markets. However, going further from there, as the technicals suggest, the Markets may continue to see some more consolidation or some corrective activities from higher levels again.

For today, the levels of 6030 and 6045 shall act as resistance. The supports come in much lower at 5955 and 5920 levels.

The lead indicators remain neutral with downward bias. The RSI—Relative Strength Index on the Daily Chart is 58.0877 and it is neutral as it shows no failure swings or any bullish or bearish divergence. The Daily MACD continues to trade above its signal line. On the Candles, A bullish harami occurred (where the current small white body is contained within an unusually large black body).  During a uptrend this pattern implies an end to the up move as the bulls appear to have exhausted themselves. During an uptrend (which appears to be the case with NIFTY) the bullish harami pattern is bearish as the bears appear to be gaining strength as the bulls weaken.

On the derivative front,  NIFTY May futures have added over 12.35 lakh shares or 5.80% in Open Interest. This is certainly a positive factor which may prevent the Markets getting immediately weak. The NIFTY PCR stands at 1.19 as against 1.16.

Overall, there is a contradictory reading on the technical charts and the derivative data. The technicals of the Markets very clearly suggest that the Markets should remain weak in the immediate short term and even with the positive opening or short up move, it is likely to see some paring of gains again. However, the derivative data show massive addition of Open Interest in NIFTY futures which show creation of fresh long positions.

Given the contradictory reading on the technical charts and the derivative data, there are clear possibilities of a volatility returning to the Markets. The positive Global Markets may see the Markets trading strong initially but it also has equal chances of seeing corrective actions from higher levels and this will keep volatility ingrained in it. It is still advised to avoid taking fresh longs in aggressive manner, but at the same time, profits on the short side should be adequately protected. Neutral outlook is advised for today.

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





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