Tuesday, December 2, 2014

Daily Market Trend Guide -- Wednesday, December 03, 2014

MARKET REPORT                                                                                December 02, 2014
The Markets had a capped but volatile session as it reacted to the RBI Credit Policy which was more or less an non-event much on expected lines. The Markets opened on a modestly negative note and traded in a capped range in the morning trade. It saw a sharp decline while reacting to the RBI Credit Policy which kept the rates unchanged. Soon after forming a day’s low of 8504.65, it saw equally sharp recovery. It recovered all of its gains and the Markets also traded in positive territory for a very brief period while it formed its day’s high of 8560.20. However, the Markets did not sustain this recovery and slipped again. It spent rest of the session in a capped but falling trajectory and finally ended the day at 8524.70, posting a net loss of 31.20 points or 0.36% while forming a lower top and lower bottom on the Daily Bar Charts.


MARKET TREND FOR WEDNESDAY, DECEMBER 03, 2014

Markets will have a critical session on Wednesday. Expect the Markets to once again open on a modestly negative note and continue with its corrective activities. In our previous edition, we had mentioned that any dip below 8540 levels would induce some weakness. Since the Markets have closed below this levels, it will see some more weakness if it continues to trade below this level. If the Markets move past this level again, it would put itself once again in consolidation stage.

The levels of 8540-60 zone and 8635 would act as immediate resistance for the Markets. The supports come in at 8430 and 8375 would act as immediate supports.

The RSI—Relative Strength Index on the Daily Chart is 65.8757 and it has reached its lowest value in last 14-days which is bearish. The RSI has formed a fresh 14-period low whereas NIFTY has not yet and this is Bearish Divergence.  The Daily MACD has reported a negative crossover and it is now bearish as it trades below its signal line.

On the derivative front, the NIFTY December futures have shed over 5.50 lakh shares or 2.51% in Open Interest. This clearly signifies that there has been shedding  / unwinding of positions at higher levels from the Markets.

Returning to pattern analysis, the Markets has once again fallen below the rising trend line of the Broadening Formation. In other words, the breakout that the Markets have attempted has failed and it is once again trading below the rising trend line. In our couple of previous editions, we have also mentioned that Broadening Formations are least useful formation in establishing clear breakouts in the Markets as it has a upward rising trend line which keeps taking the breakout price higher every day. Until the Markets move past the levels of 8560, we would continue to see temporary weakness in the trade.

Overall, we will continue to see corrective activities in the Markets in the immediate short term. In event of any up moves we would also see some volatility creeping in which can result into intermittent profit taking bouts. It is continued to be advised to refrain from blanket purchases and keep overall exposure in the Markets curtailed. While going long with very selective purchases, overall, liquidity with cautious approach is advised for the day.

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

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