MARKET REPORT May
27, 2014
What seemed to be yet another relentless rise and buoyant session
for the Markets turned into an extremely scary and volatile one as the markets
ended flat after shedding nearly 200-odd points from its intraday high. The
Markets opened on a positive note and soon gained momentum as it kept making
gradual highs. At one point in the afternoon trade, the NIFTY moved past the
psychological figure of 7500 as it formed its intraday high of 7504. The
Markets turned in sideward trajectory after that and it was gripped with
extremely volatility in the second half. The Markets saw a sudden and very
sharp paring of gains in the late afternoon trade yesterday as it pared all of
its gains and dipped into negative. It went on to shed nearly 234-odd points
NIFTY from its day’s high as it touched its intraday low of 7269.05. The Markets
saw some volatile either side movements and finally ended the day at 7359.05,
posting a minor loss of 8.05 points or 0.11% while forming a sharply higher to
but lower bottom on the Daily High Low Charts.
MARKET TREND FOR TODAY
Today, we can fairly expect the Markets to open on a flat to
mildly negative note and look for directions. Given the valuations of the Market
and the technical indicators on the Daily Charts they continue to trade
extremely overbought and because of the sharpness of the decline that we say
yesterday, we continue to advise to refrain from over leveraging in the
Markets. The Markets are all likely to continue with its corrective activity
today as well.
Today, the levels of 7385 and 7420 would act as immediate
resistance levels for the Markets.
The supports exist much lower at 7275 and
7210 levels.
The lead indicators continue to remain in extremely
overbought condition. The RSI—Relative Strength on the Daily Chart is 81.1750
and it is neutral as it shows no bullish or bearish divergences or any failure
swings. However, it continues to trade in very overbought condition. The Daily
MACD trades above its signal line.
On the derivative front, NIFTY May futures have shed nearly
18.79 lakh shares or 8.94% in Open Interest. This can partly also due to the
fact that rollovers have mildly begun and more due the fact that there was very
clear unwinding of positions that was seen with the decline in the second half
of the session yesterday.
Going by the pattern analysis, the Markets have formed an
insufficient top of 7504, i.e. a lower top compared to 7360 formed on 16th
of May. This is called “insufficient top” as the Markets formed a slightly
lower top and it is just short of a Double Top formation. This confirms the
resistance area for the Markets and adds credibility to the resistance.
All and all, we continue to reiterate to remain very
moderate on the positions. This is due to the fact that the Markets are prone
to equally sharp correctives given the current rise of the Markets. While
continuing to remain very moderate on exposures, shorts should be avoided and
new purchases should be made in extremely selective basis. Overall, continuance
of cautious approach is advised for today.
Milan Vaishnav,
Consulting Technical Analyst,
+91-98250-16331
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