Daily Market Trend Guide -- Thursday, August 27, 2015

MARKET REPORT                                                                                           August 27, 2015

Both, volatility and bearish undertone refused to let the Markets go as the Markets pared all of its day’s gain to end the day with losses. The Markets opened negative but saw a relatively resilient opening as compared to its global peers and in the morning traded crawled into the positive territory wiping out all of its morning losses. It further went into positive territory and strengthened further to form the day’s high of 7930.25. These modest gains were not sustained as the Markets gradually pared all of them.  Markets slipped into the negative but spent the afternoon trade in a narrow range with capped losses. It was the late afternoon trade that the Markets saw weakness creeping in once again. It lost ground further and went on to form the day’s low of 7777.10, giving up nearly 150-odd points from the high point of the day. It finally ended the day at 7791.85 posting a net loss of 88.85 points or 1.13% while forming a slightly higher top and higher bottom on the Daily Bar Charts.

MARKET TREND FOR Thursday, 27 August 2015

Today, we enter the expiry of the current derivative series. Though the global cues remain positive and we are likely to open on a decently positive note, there would be great amount of volatility that shall remain ingrained in the Markets. The Markets continue to remain oversold and there are chances of a technical pullback, it would be critically important to see if the Markets maintain its opening gains. Volatility would simply refuse to leave the Markets and therefore, it continues to keep our analysis more or less same on similar lines as that of yesterday.

For today, the levels of 7925 and 7990 shall continue to act as immediate resistance for the Markets. Supports come in lower at 7750 and 7660 levels.

The RSI—Relative Strength Index on the Daily Charts is 26.8153 and it continues to remain in “oversold” territory. Though it does not show any failure swing, the NIFTY has made a fresh low but RSI has not yet and this is Bullish Divergence.

On the derivative front, NIFTY August series shed over 19.39 lakh shares or 14.44% in Open 

Interest. The September series added over 43.80 lakh shares or 35.54% in Open Interest. This results into net addition of 24.40 lakh shares in Open Interest. This very clearly translates creation of fresh short positions in the Markets.

Coming to pattern analysis, the Markets have continued to remain in “oversold” territory and today pose a great chance for a technical pullback. It is important to note that under no circumstances that pullback of any nature should be construed as a reversal. The 7950-8000 zones had been a very critical support zone which the Markets have broken on the downside. On its way up, this is bound to act as a major resistance for the Markets. This is likely to keep the Markets in a broad trading range until the oscillators repair itself and owing to this, as mentioned earlier, volatility will continue to remain ingrained in the immediate short term.

All and all, though positive opening is expected, it would be equally important to see if the Markets are able to maintain those gains and are able to capitalize on that. It would be important for the Markets to sustain the opening gains and build up on that. However, intermittent bouts from higher levels cannot be ruled out as the session will continue to remain dominated with rollovers. Overall, while maintaining adequate liquidity, modest positions should be taken on highly selective basis.

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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