Daily Market Trend Guide -- Friday, August 21, 2015

MARKET REPORT                                                                                           August 21, 2015

Markets spent the session yesterday with a terribly bearish undertone as it opened negative and went on to test all of its DMA’s and ended the day with losses. The Markets saw a modestly negative and resilient opening and traded with very modest losses in the initial trade. Markets continued to trade with very limited losses and in a capped range in the first half of the session. It was in the second half that the Markets saw itself in absolute bearish grip and went on to pare itself. It slipped below its 200-DMA and went on to test its 50-DMA and 100-DMA as well as they lay in close vicinity of each other. It went on to form the day’s low at 8359.75 in the last hour of the trade. No major recovery was seen and the Markets finally ended the day at 8372.75, posting a net loss of 122.40 points or 1.44% while forming a lower top and lower bottom on the Daily Bar Charts.

MARKET TREND FOR FRIDAY, AUGUST 21, 2015

Today, we are all likely to see a gap down opening in the Markets today. We have been mentioning potentially bearish Head and Shoulders formation on Daily Charts in couple of our previous editions of Daily Market Trend Guide and we might witness a downward breach today. Unless the Markets recovers post weak opening, we are likely to see the bearish undertone continuing in the Markets today. If the downside persists, it would mean more bearish structure for the Markets for the immediate short term.

For today, the levels of 8390 and 8425 will act as immediate resistance and supports will come in much lower at 8320 and 8275 levels.

The RSI—Relative Strength Index on the Daily Chart is 44.1047 and it remains neutral as it shows no bullish or bearish divergence or failure swings. The Daily MACD remains bearish as it trades below its signal line.

On the derivative front, NIFTY August futures have added over 2.43 lakh shares or 1.69% in Open Interest. This implies that apart from unwinding that we have witnessed, some amount of fresh shorts have been added to the system as well.

Coming to pattern analysis, we have been mentioning about Head and Shoulders pattern, which is always potentially bearish. As of yesterday, the Markets have been maintaining itself along its neckline which is made up of proxy trend lines comprising of 50-DMA and 100-DMA in close vicinity of each other. Having said this, the Markets have not broken down as of yesterday’s close. However, IMPORTANTLY, with the near gap down opening expected today, we will see a downward breach on the Charts down its neckline. This will imply a fresh bearish structure for the Markets for the immediate short term. Today’s it would be fine if the Markets improve as we go ahead in the session but if such weakness persist at Close levels, we will see some more weakness in the immediate short term.

Overall, the Markets are currently with a weak technical structure. With gap down opening today, we will see a downward breach from the potentially bearish Head and Shoulders formation and this may induce some more weakness in the immediate short term. The positive crossovers of the Markets may pose resistance to the downward breach but it would be important for the Markets to improve as we go ahead in the session. Persistence of weakness at Close levels will alter the structure of the Markets for the immediate short term.

Milan Vaishnav,
Consulting Technical Analyst

Af. Member: Market Technicians Association, (MTA), USA
Af. Member: Association of Technical Market Analysts, (ATMA), INDIA
www.EquityResearch.asia
http://milan-vaishnav.blogspot.com

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