Daily Market Trend Guide -- Monday, January 25, 2016

MARKET REPORT                                                                                          January 25, 2016

Markets saw a very robust short covering led rally as it opened higher, surged further and ended the day with decent gains. The Markets saw a nearly gap up opening following positive global cues. Post opening on a higher note, the Markets remained in upward rising trajectory in the first half of the session as it kept posting fresh intraday highs. It continued to maintain these gains in a rock-solid manner while it formed its intraday high of 7433.40 in the late afternoon trade. The Markets once again traded in sideways trajectory until the end while maintaining the gains in steadfast manner .It finally settled the day at 7422.45, posting a decent gain of 145.65 points or 2% while forming a higher top and higher bottom on the Daily Bar Charts.

MARKET TREND FOR Monday, January 25, 2016

The Markets have ended near the high point of the day after a day of robust short covering on Friday. Speaking purely on technical grounds, the Markets are all likely to open once again on a modestly positive note and continue with its pullback at least in the initial trade. The markets have attempted to find a temporary bottom around 7250 and this level is likely to continue to act as a temporary bottom for the Markets. However, on its way up, the levels of 7540 will continue to post major resistance.

For today, the levels of 7460 and 7540 will act as immediate resistance levels for the Markets. The supports come in at 7380 and 7320 levels.

The RSI—Relative Strength Index on the Daily Chart is 39.92 and it remains neutral as it shows no bullish or bearish divergence or any failure swing. The Daily MACD continues to remain bearish as it trades below its signal line.

On the derivative front, the NIFTY January futures have shed over 10.63 lakh shares or 5.44% in Open Interest.  February series added OI but overall it remains evident that the rise that we saw on Friday can be squarely credited to short covering.

Coming to pattern analysis, the Markets slipped over 300-odd points after it breached its critical support levels of 7540. Thereafter, it has attempted to find a temporary bottom at 7250 and has since them attempted a decent pullback. However, it is important to note two things that the pullback that we have witnessed so far has been on account of short covering and the other thing is that even will pulling back, the Markets are likely to see stiff resistance near 7540 levels as this was the level it broke on the downside and would now act as an resistance.

Overall, some amount of short covering is likely to continue and we will see the Markets opening on a positive note. It would be good if the Markets are able to capitalize on the expected positive opening. However, more we move towards 7500 levels and up, we will see increased chance of some profit taking from higher levels. Also, we have a truncated week because of a Republic Day holiday tomorrow and therefore have just three sessions to expiry. While continuing to make select purchases, equal emphasis is advised to protection of profit at higher levels while adopting a positively cautious outlook for the day.

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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