Friday, June 6, 2014

Daily Market Trend Guide -- Friday, June 06, 2014

MARKET REPORT                                                                                        June 06, 2014
In what seemed to be a session wherein the Markets would have consolidated, turned out to be yet another session wherein the Markets continued to surge upwards while closing at fresh highs and doing so while continuing to shed open interest and defying technicals. The Markets expectedly opened on a quiet note and after remaining in the green for a very  brief period, it slipped into the red while forming its day’s low of 7360.50 in the morning trade. However, immediately after this, the Markets transformed itself into rising trajectory and kept recovering from its lows and by afternoon trade, traded flat. The Markets went on to further its recovery by trading positive and by end of the session, went on to form the day’s high of 7484.70. It finally ended the day at 7474.10, posting a decent gain of 71.85 points or 0.97% while forming a higher top but lower bottom on the Daily High Low Charts.


MARKET TREND FOR TODAY

Today as well, expect the Markets to open on a flat to mildly positive note and trade positive at least in the initial trade. By now, the Markets have been trading in “overbought” territory and it has been constantly shedding Open Interest since last several sessions. There are high chances that the Markets opens positive but later pares its gains as we go ahead in the session.

Today, the levels of 7495 and 7530 would act as immediate resistance for the Markets. The supports exist much lower at 7390 and 7340 levels.

The lead indicators continue to paint a sorry picture on the Daily Charts. The RSI—Relative Strength Index on the Daily Chart is 74.9364 and it does not show any failure swings. However, the NIFTY has set a new 14-day high while RSI has not and this is clear Bearish Divergence. Further, it continues to trade in “Overbought” territory. The MACD has reported a positive crossover and now trades above its signal line. On the Candles, an engulfing bearish line has occurred. If the engulfing bearish occurs during an uptrend which is the case with NIFTY, it may be a last engulfing top which indicates a formation of a potential top. However, this requires confirmation today.

On the derivative front, the NIFTY June futures have shed over 10.73 lakh shares or 7.10% in Open Interest. This very clearly signifies that the Markets have risen on back of short covering yesterday and no clean buying has been reported.

Going by the pattern analysis, the Markets are attempting to reach its double top formation on the bar charts but continues to remain in “overbought” territory. Given this reading, it is likely that it tests its double top resistance level but very less likely that it will go on to give a breakout on the upside. With the Markets remaining “overbought”, it is likely that the Markets would see a correction from higher levels which is very imminent and long overdue.

All and all, given the above reading, the Markets are trading at precarious levels and with the lead indicators continuously pointing towards long overdue correction, profits should be protected at higher levels and over leverage should be avoided. While maintaining ultra caution of making new purchases, it should be done on a very selective basis. While maintaining more liquidity, continuance of high degree of caution is advised for today.

Milan Vaishnav,
Consulting Technical Analyst,
+91-98250-16331


Thursday, June 5, 2014

Daily Market Trend Guide -- Thursday, June 05, 2014

MARKET REPORT                                                                                       June 05, 2014
The Markets consolidate yesterday in a very narrow 25-odd points range and ended the day flat with nominal losses. The Markets opened on a flat note on expected lines and formed its intraday high of 7433.30 in the early minutes of the morning trade. The Markets pared those nominal gains that it had in the morning and traded flat soon after that. The Markets slipped marginally in to negative territory and remained in the negative territory for the most part of the remaining session. It traded modestly downward in a 20-odd point range thereafter and saw nearly no attempt to recover or give a spurt at any moment. It went on to form the day’s low of 7391.25 towards the end of the session and finally ended the day at 7402.25, posting a nominal loss of 13.60 points or 0.18% while forming mildly higher top and higher bottom on the Daily High Low Charts.


MARKET TREND FOR TODAY

 Today, expect the Markets to open on a flat and quiet note again and look for directions. The Markets have been paring serious open interest since last three sessions; it is likely that the Markets continues to consolidate or shows some correction which is imminent and overdue for the Markets to turn healthy. Given this reading, the analysis once again remains more or less on similar lines that of yesterday. 

For today, the levels of 7430 and 7455 would act as immediate resistance for the Markets. The supports exist much lower at 7340 and 7260 levels.

The lead indicators continue to show bias towards either consolidation or downside. The RSI—Relative Strength Index on the Daily Chart is 71.9917. Though it is neutral and does not show any failure swing or bullish or bearish divergences, it continues to trade in “overbought” territory. The Daily MACD too remains bearish as it trades below its signal line. 

On the derivative front, the NIFTY June futures have shed over 7.38 lakh shares or 4.66% in Open Interest. This very clearly indicates that offloading has continued in the NIFTY futures.

Going by the pattern analysis, as we had mentioned yesterday, the Markets have attempted to achieve a breakout on the upside on the Close Charts. While it has done so on the Close Charts, it is yet to achieve a breakout on the Daily High Low Charts. While this happens, the Markets have already turned “overbought”.  Under pattern, usually Markets either consolidate or usually corrects from these levels. Any breakout achieved while remaining “overbought” is unhealthy and usually not sustained.

All and all, given the above reading, we reiterate our yesterday’s policy to remain very modestly leveraged in the Markets. Any longs that are taken should be taken very selectively and on the defensive side. While protecting profits at higher levels, continuance of very cautious approach is advised for today.

Milan Vaishnav,
Consulting Technical Analyst,
+91-98250-16331


Wednesday, June 4, 2014

Daily Market Trend Guide -- Wednesday, June 04, 2014

MARKET REPORT                                                                                             June 04, 2014
The Markets continued to brush aside the technicals and continued to surge upwards on continued heavy short covering as it ended the day on fresh highs while continuing to shed Open Interest. The Markets opened expectedly on a quiet note and after trading briefly into green with limited gains in the morning trade dipped into negative while it formed its day’s low of 7342.15. However, the Markets changed its trajectory soon after that and started seeing some strength coming in as it not only went back in to the green but also went on to form day’s high of 7424.95. The Markets saw some sudden paring of gains at these levels but it recovered again to finally end the day at 7415.85, posting a net gain of 53.35 points or 0.72% while forming a higher top and higher bottom on the Daily High Low Charts.


MARKET TREND FOR TODAY

Today’s analysis remains more or less on similar lines that of yesterday. The Markets are likely to open on a flat and quiet note and look for directions. Even if its continues to show some strength, they are now trading “overbought” and there are all chances that the Markets show some corrective actions which are now overdue and imminent given the technicals, pattern analysis and the F&O data as well.

For today, the levels of 7445 and 7470 would act as immediate resistance levels for the Markets. The supports exist much lower at 7340 and 7270 levels.

The lead indicators too continue to show weariness and bias towards impending correction in the Markets. The RSI—Relative Strength Index on the Daily Chart is 73.5097 and it does not show any failure swings. However, the NIFTY has formed a new 14-day high whereas the R SI has not and this is a very clear Bearish Divergence. Further, the RSI now trades in “Overbought” territory. The Daily MACD continues to remain bearish even after two days of robust gains as it trades below its signal line and is bearish.

On the derivative front, NIFTY June futures have shed over 6.54 lakh shares or 3.96% in Open Interest. This very clearly indicates that unwinding of existing positions is done and the rise that we saw yesterday has been clearly on back of heavy short covering.

Going by the pattern analysis, the Markets have attempted to move past the  Double Top Formation of 7381 at Close levels. Though it has moved past this double top at Close levels, they trade much below the Double Top formation on Daily High Low Bar Charts. To add to this, they have now entered the “overbought” condition with continuous reduction of  Open Interest in last two days. This translates into conclusion that the Markets shall not achieve a clear cut straight forwards breakout but would continue to either consolidate OR correct from these levels.

All and all, while continuing on yesterday’s lines, we continue to reiterate to refrain from creating over exposures in the Markets. Fresh purchases should be done on extremely selective basis and should remain highly stock specific and defensive. Over, while maintaining liquidity, continuance of cautious approach is advised for today.

Milan Vaishnav,
Consulting Technical Analyst,
+91-98250-16331


Tuesday, June 3, 2014

Daily Market Trend Guide -- Tuesday, June 03, 2014

MARKET REPORT                                                                                        June 03, 2014
Markets saw a big upsurge yesterday on back of massive short covering and ended the day on robust gains while putting all technical readings on the back burner. We call it short covering because the Markets have shown this upsurge with decline in net open interest. The Markets opened on a relatively quiet note and made quiet advances in the morning trade while it traded with decent gains. However, the Markets gained further momentum in the second half of the session while it saw itself strengthening. It kept inching upwards for the rest of the sessions with virtually no signs of any weakness. It went on to report the day’s high of 7368.60 and finally managed to end the day at 7362.50, posting a robust gain of 132.55 points or 1.83% while forming a higher top and higher bottom on the Daily High Low Charts.


MARKET TREND FOR TODAY

Brushing all technicals aside, the Markets surged yesterday on back of huge short covering. Today as well, expect the Markets to open and trade mildly positive, at least in the initial trade. All possible technical readings suggest the Markets are now overdue for a serious correction but it has been sustaining just on the back of FII inflows and given this reading we now sound a serious voice of caution against taking any blanket positions in the Markets.

For today, the levels of 7390 and 7435 would act as immediate resistance for the Markets. The supports exist much lower at 7280 and 7210 levels.

All lead indicators suggest otherwise what is happening in the Markets. The RSI—Relative Strength Index on the Daily Chart is 71.3058 and it is neutral as it shows no bullish or bearish divergence or any failure swings. However it trades in ‘overbought’ condition. Further, Daily MACD too continues to trade below its signal line and it is bearish despite yesterday’s upsurge.

On the derivative front, NIFTY June futures have shed over 1.89 lakh shares or 1.13% in Open Interest which very clearly indicates massive short covering today.

Going by the pattern analysis, the Markets have been consolidating after touching 7500 twice and this consolidation has been in a broad 200+ point range. However, even while being in consolidation mode, the Markets are currently “overbought” and any breakout on the upside would make it further overbought. This is not a good technical signs and the Markets would sustain just because of inflows but will be extremely unhealthy and with questionable sustenance.  

Overall, at this point, given the technical readings, the overbought condition of the lead indicators, we now sound a voice of serious caution against any blanket buying in the Markets. The Markets would also react to the RBI credit policy later today. The overall consensus is towards no change in the key rates but given the tendency of the Government to keep curbing the autonomy,  the outcome cannot be predicted. Under such circumstances it is strongly advised to stick to defensives while making new purchases and maintain high degree of caution for today.

Milan Vaishnav,
Consulting Technical Analyst,
+91-98250-16331