MARKET REPORT April
10, 2014
Yesterday’s session which looked lacklustre until the late
afternoon trade, saw the Markets touching new lifetime highs as the Markets saw
a very sharp spurt in the second half of the session. The Markets opened on a
modestly positive and quiet note and until afternoon trade, traded in a very
capped and narrow range with limited gains. However, the second half of the
Markets saw a extremely sharp up move which saw the Markets surging over 80-odd
points from its day’s low. The Markets surpassed its previous high to form a
new lifetime high as it formed the intraday high of 6808.70. The Markets managed to maintain these gains
as it hovered around these levels and finally ended the day at 6796.20, posting
a robust gain of 101.15 points or 1.51% while forming a sharply higher top and
higher bottom on the Daily High Low Charts.
MARKET TREND FOR TODAY
Though the Markets have moved past its previous highs to
form a new one, it has not yet achieved a clear cut breakout on the Daily
Chart. Today, the Markets are expected to open on a flat to modestly negative
note and look for directions. The start is expected to be little subdued and it
would be important to see if the Markets continues with its up move while
remaining in extremely “overbought” territory with negative divergence.
The levels of 6810 and 6835 would act as immediate
resistance as the Markets now trade once again in uncharted territory. The
levels of 6725 and 6650 would act as immediate support.
The lead indicators show all signs of weariness in the Markets.
The RSI—Relative Strength Index on the Daily Chart is 76.7761 and though it
does no show any failure swings, it continues to trade in extremely “overbought”
condition. Further, the NIFTY has set a new 14-period high whereas the RSI has
not and this is a clear Bearish Divergence. The Daily MACD once again reports a
positive crossover as it now trades above its signal line.
On the derivative front, NIFTY April futures have added over
7.21 lakh shares or 4.52% in Open Interest.
Going by the pattern analysis, as mentioned, the Markets
have not given a clear cut breakout on the Daily Charts. It would be important
to see if it gives a breakout today but that would come with the Markets being
heavily “overbought” and would put a big question of sustainability on the up
move. The second most important thing is that the Markets have now entered a “euphoria”
stage and it is very clearly evident because of the fact that the Markets have
moved up despite all technical factors remaining against it. This make the
current up move more risky and prone to equally sharp correction at one point
of time.
All and all, the Markets have caught a level of frenzy and
we would very strongly advise retain investor to refrain from creating shorts.
At the same time, the fresh purchases should be extremely limited to defensives
like IT and Pharma and all high beta stocks should be avoided as the current up
move is now prone to equally sharp correction. Overall, high degree of caution
is advised for today.
Milan Vaishnav,
Consulting Technical Analyst,
+91-98250-16331
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