Daily Market Trend Guide -- Tuesday, October 14, 2014

MARKET REPORT                                                                                           October 13, 2014

The Markets traded precisely on analysed lines as it opened lower following global weakness but ended the day after a smart recovery by taking support on the mentioned levels. The markets saw a near gap down opening again as it opened weak. After opening in the negative note, the Markets lost some more ground in the early trade as it touched its day’s low of 7796. However, as we had mentioned in our previous edition, the levels of 7800-20 were important supports and the Markets did make an attempt to hold on to these levels. Immediately after testing these levels the Markets saw some fresh strength and recovered smartly from lower levels. It not only recouped all of its losses but also went into the green and further went on to post the day’s high of 7901.15. This recovery was sustained and the Markets finally settled the day at 7884.25, while posting a modest gain of 24.30 points or 0.31% while forming a lower top and lower bottom on the Daily Bar Charts.

MARKET TREND FOR TUESDAY, OCTOBER 14, 2014

The Markets are expected to open on a mildly positive note and there are chances that it continues with its up move in the initial trade. However, the Markets are not completely out of the woods as though it has taken support near the mentioned levels, it is still trading below its 50-DMA, (though within its filters) and therefore possibilities of the Markets remaining in trading range cannot be ruled out. However, better Inflation data will certainly add fuel to the sentiment and aid recovery.

The level of 7915 and 7975 would act as resistance. The levels of 7800-20 and 7725 would act as important supports.

The RSI—Relative Strength Index on the Daily Chart is 45.1238 and it is neutral as it shows no bullish or bearish divergence or any failure swing. The Daily MACD continues to remain bearish while trading below its signal line.

On the derivative front, the NIFTY October futures have shed over 6.07 lakh shares or 3.94% in Open Interest. This signifies that the rise that we saw was more on account of short covering form lower levels. It remains to be seen if this short covering is further replaced with fresh buying.

Going by the pattern analysis, the Markets are not completely out of the woods. Though it took support at the 7800-20 range, it still trades below its 50-DMA and this may pose some resistance at higher levels. On the lower side, if the Markets tests these levels again then creeping of some more weakness just cannot be ruled out. There is no clear directional bias in the Markets. 

Overall, the Markets still demands adequate amount of caution as it trades with no directional bias and structurally it has a bit of downward  / consolidation bias as it still trades below its 50-DMA. Though the chances of the Markets improving are equally good from these levels  because of lower inflation numbers  but until the directional bias gets evident, it is advised to continue the Markets with caution. 

Milan Vaishnav,

Consulting Technical Analyst,
Af. Member: Market Technicians Association (MTA), USA
Af. Member: Association of Technical Market Analysts, INDIA

www.MyMoneyPlant.co.in

http://milan-vaishnav.blogspot.com

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