Daily Market Trend Guide -- Thursday, January 14, 2016

MARKET REPORT                                                                                      January 14, 2016

Markets saw tremendous amount of volatility yesterday after its plunged to a fresh 52-week lows and then recovered later in a V-shaped recovery after swinging 165-odd points on either side. The Markets saw a positive and stable opening and formed its intraday high of 7590.95 in the morning session of the trade. The Markets remained in sideways trajectory in the first hour and half of trade but saw sudden weakness creeping in thereafter. The Markets saw a near vertical fall in the early afternoon trade as it erased all of its morning gains to dip in the negative. It saw sharp weakness being extended as it saw the low point of the day at 7425.80, coming off nearly 165-odd points from the high point of the day. However, it was the late trade that saw an equally sharp recovery and recovered very sharply to trade back in the green. It finally ended the day at 7562.40, posting a modest gain of 52.10 points or 0.69% while forming a similar top but lower bottom on the Daily Bar Charts.

 

MARKET TREND FOR THURSDAY, January 14, 2016

The session is all likely to remain very much volatile today with the levels of 7540 playing the important role once again. Today, we can expect a negative start to the Markets once again. There are two things to consider at this time. With the levels of the lower gap down opening expected, the Markets will once again get nearly oversold and secondly, the opening is likely to be once again below the levels of 7540 and therefore the levels of 7540 will be critical to watch out for once again.

For today, the levels of 7590 and 7645 are immediate resistance levels on the Daily Charts, the supports would exist at 7480 and 7430 levels.

The RSI—Relative Strength Index on the Daily Chart is 37.1729 and it remains neutral as it shows no bullish or bearish divergence or any failure swings. The Daily MACD stands bearish as it continues to trade below its signal line. On the Candles, a long lower shadow occurred which typically suggests bottom formation for the immediate short term.

On the derivative front, the NIFTY January futures have added over 4.13 lakh shares or 1.90% in Open Interest.  The NIFTY PCR stands at 0.80 as against 0.78 yesterday. It should be noted that in absence of any major net FII sell figure, there is large amount of short position that exists in the system.

Coming to pattern analysis, we can have two types of readings; for the immediate short term and the other one for the medium term. If we take the immediate short term view, we can fairly expect that the Markets will show some amount of resilience at lower levels and we can expect a short – covering led technical pullbacks of the kind we witnessed yesterday. At the same time, the levels of 7540-7600 will continue to act as major resistance zone for the Markets in the immediate medium term. So, there are fair chances that we see resilience at lower levels  in the coming day, but see the Markets consolidating at somewhat higher levels with a negative bias.

All and all, so far as today is concerned, there are mild chances that we see the Markets improving as we go ahead in the session. There are chances that even if the rallies are not supported by major buying, some short covering led rallies can be seen. In event of any downsides, shorts should be avoided and very selective stock specific purchases may be made.  In event of pullbacks, such pullbacks should be utilized to protect profits while maintaining a very cautious outlook on 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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