Monday, May 5, 2014

Daily Market Trend Guide -- Monday, May 05, 2014

MARKET REPORT                                                                                                May 05, 2014
The Markets continued to remain in a consolidating mode in the Friday’s session as it opened the day with gains but gradually pared all of those gains to end with minor losses. The Markets opened the day on a positive note and formed its intraday high of 6737.65 in the very early minutes of the trade. The Markets pared all of its gains in the morning trade itself to trade flat in capped range with very limited gains. Thereafter, the Markets spent the most part of the session in a 20-odd points range while remaining in falling trajectory making lower tops. It dipped into the red in the last minutes of the trade to form the day’s low of 6689.50. The Markets finally ended the day at 6694.80, posting a minor loss of 1.60 points or 0.02% while forming a lower top and higher bottom on the Daily High Low Charts.


MARKET TREND FOR TODAY

Expect the Markets to open on a modestly positive note and trade with gains at least in the initial trade. However, while continuing with our Friday’s analysis, we expect the Markets to continue to remain in a range bound consolidation. Given this, it is once again likely that the Markets may see initial technical spurt but later on pares its gains while continuing to correct / consolidate at these levels.

For today, the levels of 6720 and 6745 are likely to act as immediate resistance on the Daily Charts. The supports exist much lower at 6650 and 6605 levels.

The lead indicators continue to point towards weakness in the markets continuing. The RSI—Relative Strength Index on the Daily Chart is 51.5724 and it has reached its lowest value in last 14-days which is bearish. Further to this, the RSI has set a new 14-period low while NIFTY has not yet and this is Bearish Divergence. The Daily MACD continues to remain bearish while trading below its signal line. On the Weekly Charts, the Weekly RSI continues to remain “overbought”.  The Weekly MACD too continues to remain in “overbought” territory.

On the derivative front, the NIFTY May futures have continued to shed 98,100 shares or 0.76% in Open Interest. This signifies that offloading  / unwinding of positions continued though in moderate quantities.

Going by the pattern analysis, as we have mentioned often in our previous editions of Daily Market Trend Guide, the Markets have retraced and have corrected after forming a top at 6869 levels after it failed to breakout on the upside. Since then, the Markets have been correcting and keeping in view the pattern formation and this being supported by F&O data and lead indicators, the Markets are all likely to remain in this corrective / consolidation stage for some more time.

All and all, we continue with our analysis of Markets remaining in corrective mode for some time. However, some intermittent technical pullbacks should not be ruled out. Any such pullbacks should be utilized in booking profits in long positions and dips should be utilized in making very selective purchases. However, overall exposure should still be kept at moderate levels and cautious approach should be maintained for today.

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


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