Daily Market Trend Guide -- Friday, December 18, 2015

MARKET REPORT                                                                             December 18, 2015

Markets resisted precisely at the 7800 levels in the first half of the session but finally ended above it after a sharp rise mainly aided by short covering. The Markets saw a modestly positive opening as expected but resisted exactly at 7800+ levels. No sooner did the Markets touch this level it rapidly pared all of its gains. At one point, it came off more than 50-odd points from its opening gains and traded briefly in the negative territory while it formed its intraday low of 7737.55. It traded flat in the entire first half of the session. It was the second half that saw a sharp spurt. Markets saw a sharp rise and not only it moved past its opening highs  but also went on to form the day’s high of 7852.90, rising over 120-odd points from the low point of the day. It finally settled the day at 7844.35, posting a decent gain of 93.45 points or 1.21% while forming a higher top and higher bottom on the Daily Bar Charts.

MARKET TREND FOR FRIDAY, DECEMBER 18, 2015

Markets might witness today a bit of consolidation after nearly 300-odd points of a pullback in last couple of sessions. We can expect the Markets to open on a modestly negative note and consolidate in the initial trade. The likely opening level would be around its important pattern resistance of 7800 that it breached on the upside. It is likely that the Markets open around those levels and see some consolidation. Behavior of the Markets vis-à-vis this level would be important to watch out for.

For today, the levels of 7875 and 7920 will act as immediate resistance levels. The supports come in at 7800 and 7740 levels.

The RSI—Relative Strength Index on the Daily Chart is 51.8876 and it has just reached its highest value in last 14-days which is bullish. Also, the RSI has set a fresh 14-period high but the NIFTY has not yet and this is Bullish Divergence. The Daily MACD has reported a positive crossover and is now bullish as it trades above its signal line.

On the derivative front, the NIFTY December series have shed over 4.50 lakh shares or 2.31% in Open Interest. This is clear indication that the sharp rise that we saw yesterday has come back on short covering. The NIFTY PCR stands unchanged at 0.82.

While coming to pattern analysis, the Markets have managed to move past yet another of its pattern resistance levels of 7800 yesterday after resisting to it in the first half of the session. Technically speaking, this should not act as a support in event of any consolidation. We have mentioned often in our previous editions of Daily Market Trend Guide that though the Markets have pullback after finding support at its 52-week lows, it has not yet confirmed the bottom. Today, we expect a modestly negative opening around the pattern support and ideally speaking, the Markets should consolidate with remaining above this critical support level of 7800, consolidate for a day or so an resume its up move. If this happens, it would amount to confirmation of bottom for a immediate short term.

As mentioned above, the behavior of the Markets vis-à-vis the level of 7800 would be important to watch out for. The Markets will have to remain above 7780-7800 zones in order to just consolidate and avoid any weakness from creeping in. Any breach below these levels will induce some short term minor consolidation in the Markets and delay confirmation of a bottom. It is advised to continue to remain modest and selective on purchases while continuing to protect profits 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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