Monday, July 14, 2014

Daily Market Trend Guide -- Monday, July 14, 2014

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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