Daily Market Trend Guide -- Thursday, August 13, 2015

MARKET REPORT                                                                       August 13, 2015

The Markets continued to remain bearish and ended with a deep cut for the third day in a row as weak technicals continued to take toll on the Markets. The Markets saw a negative opening on expected lines but spent the morning trade trading in a narrow range and making minor attempts to recover. The second half of the session turned out more disappointing than expected as it was gripped with good amount of weakness. It once again transformed itself into falling channel and kept making gradual lows quickly. At one point of time, it went on to form the day’s low of 8337.95, dipping below its 200-DMA and testing its 100-DMA and 50-DMA as well. No major recovery was seen and the Markets finally ended the day at 8349.45, posting a net loss of 112.90, posting a sharp cut of 112.90 points or 1.33% while forming a sharply lower top and lower bottom on the Daily Bar Charts.

MARKET TREND FOR THURSDAY, AUGUST 13, 2015

Markets are poised today at a extremely critical juncture. It is expected that the Markets may open on a flat and quiet note and look for directions. The levels of 50-DMA today, i.e. 8372 will be crucial to watch out for and it is likely to pose resistance to the Markets. In order to avoid imminent weakness in the Markets, it would be crucially important for the Markets to move past this level. In even of any breach, the Markets will see more downsides induced by not-so-classical fragile potentially bearish Head & Shoulders pattern.

For today, the levels of 8372 and 8425 will act as immediate resistance levels. The supports would come in at 8305 and 8230 levels.

The RSI—Relative Strength Index on the Daily Chart is 41.6191 and it has reached its lowest value in last 14-days which is bearish. Also, the RSI has set a fresh 14-period low while NIFTY has not and this is Bearish Divergence. The Daily MACD remains bearish as it trades below its signal line.

On the derivative front, NIFTY August futures have shed over 5.22 lakh shares or 3.16% in Open Interest. This is bearish as this shows clear unwinding and reduction of positions.

Going by the pattern analysis, after resisting to the upward rising trend line drawn from 8000-levels, the Markets have formed a Head & Shoulders pattern on the Daily Charts. This pattern is a potentially bearish formation and has weakening measuring implications. If the Markets breach its neckline, the breach may take the Markets significantly on the downside. However, such pattern needs confirmation and requires the day’s high below the neckline. Further to this, one has to await confirmation for this. Even further to this, there are chances that the Markets take support at its all important DMAs which happen to be very near to the neckline.

Overall all, given the above mentioned scenario, lots of uncertainties remain in the Markets. Markets will see an acid test today in order to prevent itself from the break down from the neckline. Markets will attempt to reverse taking cues from good IIP data but in any case so long as the Markets trade above 8550 levels, it will remain vulnerable to downside selling bouts. Excessive exposures should be strictly avoided until the directional bias gets clear.

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

Consultant to:
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milan.vaishnav@equityresearch.asia
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