Wednesday, July 31, 2013

Daily Market Trend Guide -- Wednesday, July 31, 2013


MARKET REPORT                                                                                  July 31, 2013 

The Markets had a thoroughly disappointing session yesterday after it reacted negatively to RBI announcements as it saw selling pressure after the announcements coming in and went on to end the day near its lowest point. The Markets opened on a flat note and moved absolutely flat and sideways until the RBI announcements came in. It reacted momentarily in volatile manner as it gave its day’s high of 5861.30. However, after this, it very quickly pared its gains and traded flat. The pressure on the Markets intensified in the second half as the Markets gradually kept losing ground. It went on to give the day’s low of 5747.60 as it came off over 110-odd points from its day’s high. No major recovery was seen from these lows and the Markets ended the day at 5755.05, posting a net loss of 76.60 points or 1.31%.


MARKET TREND FOR TODAY

The Markets have ended the day yesterday below its 200-DMA and is likely to see a flat opening again today. Given the derivative figures, the Markets may attempt to find its bottom after initial flat to mildly negative trade. Under such formations, like yesterday, the intraday trajectory would continue to remain utmost important. It is important to note at this juncture that the Markets are defying the technicals and the F&O data which have suggested heavy resistance to such down move.

For today, the levels of 5853 and 5890 are immediate resistance on the Charts. The supports come in at 5725 and 5690 levels.

The RSI—Relative Strength Index on the Daily Chart is 39.6983 and it has reached its lowest value in last 14-days. However, unlike last few days, it has NOT shown any bearish divergence today. The Daily MACD continues to trade below its signal line.

On the derivative front,  the NIFTY August futures have shed over 7.86 lakh shares in Open Interest and this is not a good sign. This suggests that some long unwinding has been done and it needs to be seen now if this gets replaced with fresh longs.

It is important to note at this juncture that during the last entire week, the Markets have acted in total defiance to the technicals and the lead indicators. Even it has defied what the F&O data has suggested. Even when some shedding of some OI has been reported, it is very important to note that almost all components of NIFTY and BANKNIFTY now stands heavily OVERSOLD. Given this, if we purely consider the technicals the downside remains limited.

Given the above reading, the best option for a retail trader / investor is to stick to the technical picks and use this recent downside to accumulate good blue chips which are being traded with hammered prices. Shorts should still be avoided as a pullback now seem imminent and can happen any time. This time is best to pick up select stocks as selective out performance is bound to happen. While maintaining adequate liquidity, very selective purchase should be made and cautious optimism is advised for today.

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


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