MARKET REPORT July
14, 2014
After taking support near its critical support levels of
7500 twice on Friday, the Markets slipped further to give a negative breakdown
and to end the day with decent losses. The Markets opened on a positive note
and after forming its day’s high of7625.85 in the early minutes of trade, it
traded in a sideways range initially. However, early afternoon trade saw it
drifting into the red as the Markets rapidly lost ground to touch the levels of
7500. It attempted a minor pullback while taking support at these levels but at
this did not sustain much as the Markets saw continued selling pressure on
itself. It went on to touch the levels of 7500 again and even drifted below
that to form the day’s low of 7447.20. No recovery was seen from these levels
and the Markets ended the day at 7459.60, posting a loss of 108.15 points or
1.43% while forming a lower top and lower bottom on the Daily High Low Charts.
MARKET TREND FOR TODAY
The Markets have breached it’s important support levels of
7500 on Friday. Today the Markets are likely to open on a flat note but its behaviour
vis-à-vis the levels of 7500 would be very critical today. We had often
mentioned in our previous editions of Daily Market Trend Guide that the Markets
remain precariously overbought on Weekly Charts and this week saw one of the
worst weekly losses in recent months. Any technical pullback might witness
resistance near 7500 levels today.
For today, the levels of 7500 and 7545 would act as
immediate resistance for the Markets. In case of Markets drifting lower, the
levels of 50-DMA, i.e. 7386 may be tested which may act as support on lower
levels.
The lead indicators continue to paint a bearish picture. The
RSI—Relative Strength Index on the Daily Chart is 44.4735 and it has reached
its lowest value in last 14-days which is bearish. It does not show any bullish
or bearish divergence. The Daily MACD is bearish as it trades below its signal
line. On the Weekly Charts, the RSI is 65.5996 and it has just crossed below
its topping formation which is bearish. Although it does not show any failure
swings or any bullish or bearish divergence. The Weekly MACD still continues to
trade above its signal line. On the Candles on the Weekly Charts, an engulfing
bearish line has occurred. The engulfing bearish pattern is
bearish if it appears during an uptrend, which appears to be the case with
NIFTY. This markets a possible reversal of trend.
On the derivative front, the NIFTY July futures have added a
nominal 86,800 shares or 0.64% in Open Interest. This shows that despite such
fall some minor shorts have appeared to have been added. The NIFTY PCR stands
at 0.66.
Going by the pattern analysis, as mentioned earlier the
Markets were trading in a broad 7500-7700 trading range. On Friday, the Markets
have breached the levels of 7500 and therefore we may see some more weakness creeping in. If
the Markets drifts lower, it is likely that it tests its 50-dma levels. Any
upside should encounter some resistance near 7500 levels.
Overall, going purely on technical grounds the Markets may
see some more weakness creeping in since it has breached the support levels of
7500. However, given the F&O data, some technical pullback is
possible but it is likely that it encounters resistance at 7500 levels. This
translates into possibility of a range bound session and volatility is likely to
remain ingrained. It is advised to avoid creating any fresh positions and
protect profits on either side. Liquidity should be preserved until directional
bias is clear. Overall, caution and restrain is advised in the Markets today.
Milan Vaishnav,
Consulting Technical Analyst,
+91-98250-16331
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