Daily Market Trend Guide -- Tuesday, August 25, 2015

MARKET REPORT                                                                                   August 25, 2015

Markets witnessed total carnage and destruction following global weakness as it opened gap down and went on to post largest intraday loss since 2009. The Markets saw a gap down opening which was as such on expected lines. It did continued to trade with opening losses in a  capped range in the morning trade but real carnage intensified in the second half of the session.  The Markets not only went on to break psychological 8000 mark but went on to breach its double bottom support of 7962 levels significantly. The sell-off which lead to one of the highest FII sell-offs in recent history went on to defy all levels as the Markets went on to touch the intraday low of 7769.40. No major support was seen coming in at any point of time as the Markets finally ended the day at 7809, posting a massive loss of 490.95 points or 5.92% forming a sharply lower top and lower bottom on the Daily Bar Charts.

MARKET TREND FOR TUESDAY, AUGUST 25, 2015

Markets have formed an extremely bearish structure breaking down violently from the neckline of the bearish Head and Shoulders formation on the Daily Charts. While this has happened, the Markets have moved past is possible measuring implications on the downside and have got highly oversold has well. Following this, we are likely to see a gap up opening in the Markets and see the Markets opening with decent gains. However, key would be to see if the Markets maintain these gains and capitalize on it as the triple bottom support of 7950-7980 zones will now act as resistance.

For today, the levels of 7910 and 7970 will act as immediate resistance for the Markets. The supports will now exist at 7750 and 7640 levels.

The RSI—Relative Strength Index on the Daily Chart is 24.5194 and it now trades in ‘oversold’ territory. It has reached its lowest value in last 14-days which is bearish. It does not show any bullish or bearish divergence. The Daily MACD continues to trade below its signal line and is therefore bearish.

On the derivative front, NIFTY August futures have added over 14.56 lakh shares or 9.88% in Open Interest. This now indicates massive short positions in the Markets.

Coming to pattern analysis, the Markets have broken down after a bearish head and shoulders formation on the Daily Charts over last two sessions. The usual measuring implication would have set the targets on the downsides at 7950-8100 levels but the global turmoil added more fuel to the fire and the Markets went down much beyond that. In the process, it has also breached its triple bottom support of 7950-7980 zones and these levels are now expected to act as resistance on the upside. Today’s expected upside opening will cause the Markets to open near these levels and therefore it would be utmost critical for the 

Markets to sustain these levels and manage to remain above that.

Overall, there would be great amount of volatility that shall remain ingrained in the Markets. As mentioned, the 7950-7980 zones will continue to pose resistance and it would be imperative for the Markets to sustain the opening gains. Though great amount of shorts have been seen built up in the system, the overall structure of the Markets shall make it difficult to pose a easy recovery. While maintaining adequate liquidity, it is advised to stay away from taking any major exposures in the Markets.

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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