Daily Market Trend Guide -- Thursday, January 21, 2016

MARKET REPORT                                                                                      January 21, 2016

The Markets once again had a thoroughly bearish session as it posted its fresh 52-week lows and ended yet another day with losses after recovering a bit from the low point of the day. The Markets saw a gap-down opening following global weakness and it traded in a sideways trajectory for the first half of the session while showing no signs of recovery. In the second half, the weakness intensified as the Markets breached the psychological levels of 7300 to form the day’s low at 7241.50. However, in the final hour of the trade, the Markets came off its lows and attempted to recover. It did recover some 60-odd points from the low point of the day. The Markets finally settled the day at 7309.30, posting a net loss of 125.80 points or 1.69% while forming slightly higher top but sharply lower bottom on the Daily Bar Charts.

MARKET TREND FOR Thursday, January 21, 2016

Markets pulled back some 60-odd points from the low point of the day yesterday. Technically speaking, we can expect the Markets continue with its up move today as well. Keeping line with this analysis, the Markets are expected to open on a decently positive note and look for directions in initial trade. It would be critically important to see if the Markets are able to capitalize on its up move and build further gains.

For today, the levels of 7375 and 7420 will act as immediate resistance levels for the Markets. The supports come in at 7240 and 7175 levels.

The RSI—Relative Strength Index on the Daily Chart is 30.4766 and it is once again very near to being “oversold”. The NIFTY has made fresh 14-days lows but RSI has not and this is Bullish Divergence. It does not show any bullish or bearish divergence. The Daily MACD is bearish as it trades below its signal line.

On the derivative front, the NIFTY January futures have shed just 15,525 shares or negligible 0.07% in Open Interest. NIFTY PCR stands at 0.83 as against 0.82 yesterday.

While having a look at pattern analysis, the Markets hare off nearly 250-odd points after breaching the critical support levels of 7540. In the process the Markets have got oversold as well and are now attempting pullback. With the lead indicators remaining nearly oversold once again, any downtick with take the Markets to being oversold once again. This makes a pullback imminent. It would be also important to note that there has been an increase in PCR and this shows that despite fall in the Markets, there has been massive buying of puts that is going on. On the other hand, it also becomes important to note that the NIFT VIX have peaked little above September 2015 levels. This shows some hopes of the Markets bottoming out.

All and all, what we see on the Charts is that the Markets are attempting to find a short term base and are attempting to pullback. It becomes all the more important to note that even if the Markets see technical pullback, the levels of 7540 going ahead will be a major resistance to watch out for. The Markets are likely to see technical pullback but that should not be constituted as a trend reversal. While continuing to buy on selective basis, shorts should be avoided while adopting positive caution 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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