Daily Market Trend Guide -- Monday, October 12, 2015

MARKET REPORT                                                                                  October 12, 2015

Markets showed very resilient consolidation on Friday as it ended the day with decent gains though it did come off its opening / intraday highs while resisting to its 100-DMA and its important pattern resistance. The Markets saw a positive and strong opening and it strengthened further in the morning trade to form the day’s high of 8232.20. These levels happen to be very important pattern resistance and the Markets resisted to this. While resisting to this level,  the Markets put itself in some correction mode and retraced gradually from its intraday high in the first half of the trade. At one point, by afternoon trade, the Markets gave up nearly majority of its gains. It was in the last hour and half of the session wherein the Markets once again attempted to pullback. It saw some recovery once again from the intraday low of 8139.65 and finally settled the day at 8189.70, posting a decent gain of 60.35 points or 0.74% while forming a higher top and higher bottom on the Daily Bar Charts.

MARKET TREND FOR MONDAY, OCTOBER 12, 2015

Though the Markets have continued to portray good amount or resilience and buoyant undertone, it continues to trade in a congestion / consolidation zone with has resistance of 8230-8260 levels. Today, though the Markets are expected to open on a modestly positive note, the likely opening would again be in this congestion zone. The intraday trajectory that the Markets form, therefore, would continue to remain of critical important to affect the trend for today as well as for immediate short term.

For today, the levels of 8220 and 8260 will act as immediate resistance for the Markets. The supports come in at 8140 and 8075 levels.

The RSI—Relative Strength Index on the Daily Chart is 60.3127 and it does not show any failure swing. However, the NIFTY has formed a fresh 14-period high but RSI has not and this is Bearish Divergence. The Daily MACD remains bullish as it trades above its signal line. On the Weekly Charts, the Weekly RSI is 49.3782 and it remains neutral as it shows no failure swings or any bullish or bearish divergence. The Weekly MACD remains bearish as it trades below its signal line.

On the derivative front, the NIFTY October future shave added 45,750 shares or 0.22% in Open Interest. This shows no major short covering / unwinding of positions as the OI remains more or less unchanged. This also keeps the underlying buoyancy intact to some extent.

If we have a look at pattern analysis, as mentioned often in our previous editions the Markets have managed to move out / break out of the broad rectangle and have managed to move past its important pattern resistance range of 8000-8060. However, it continues to now trade between its 50 and 100DMA which also happen to be t he “gap” that the Markets created in the first week of September with its upper range being 8240-8260 levels. With the levels of 100-DMA just around there, these zone is again likely to pose a significant resistance to the Markets going forward.

All and all, keeping all this in view, it is clear without doubt that the Markets have shown considerable of resilience and underlying buoyancy even after some six days of straight gains. It has consolidated in sideways manner rather than retracing this makes it even more resilient. However, in the same breadth, the Markets also trade in congestion zone and is yet to pass another important pattern resistance. This will continue to keep the Markets vulnerable to selling pressure from higher levels. While completely avoiding shorts looking at the underlying buoyancy, very selective purchases can be made on dips while protecting profits vigilantly at higher levels.

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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