Daily Market Trend Guide -- Monday, February 01, 2016

MARKET REPORT                                                                                      February 01, 2016

The Markets staged a robust up move on Friday on back of positive global cues triggered by adoption of negative interest rate policy by Japan and ended the day with solid gains. The Markets saw a very minor negative opening and it formed its intraday low of 7402.80 in the very early seconds of the trade. In no time it was trading in positive trajectory and traded with capped gains in the initial trade. The morning trade was spent trading in sideways trajectory after which the Markets gains some more strength and transformed itself in upward rising trajectory. It went on to form the day’s high of 7575.65 after briefly resisting the levels of 7540. These levels were sustained and the Markets finally settled the day at 7563.55, posting a net gain of 138.90 points or 1.87% while forming a sharply higher top but slightly lower bottom on the Daily Bar Charts.

MARKET TREND FOR MONDAY, FEBRUARY 01, 2016

While trading precisely as analysed while the Markets consolidated couple of days, the Markets on Friday finally went on to test the critical levels of 7540 an even went beyond it. Speaking purely on technical grounds, the Markets have ended the day on Friday near the high point and today it is expected to continue with its pullback at least in the initial trade. 

The Markets are expected to open on a modestly positive note and continue with its up move and is likely to test 7600 levels.

For today, the levels of 7600 and 7645 will act as immediate resistance levels for the Markets. The supports come in at 7540 and 7465 levels.

The RSI—Relative Strength Index on the Daily Charts is 49.6029 and it has reached its highest levels since last 14-days which is bullish. RSI has also formed its fresh 14-day high while NIFTY has not yet and this is Bullish Divergence. The Daily MACD has reported a positive crossover and is now bullish as it trade above its signal line.  On the Weekly Charts, the Weekly RSI is 41.2901 and it remains neutral as it shows no bullish or bearish divergence or any failure swing. The Weekly MACD remains bearish as it trades below its signal line.

On the derivative front, the NIFTY February series have added over 5.47 lakh shares or 2.91% in Open Interest. This is a positive sign as the up move that we saw on Friday was not merely on account of short covering. Fresh longs too have been witnessed.

Coming to pattern analysis, the Markets tested its important levels of 7540 on Friday. As mentioned often in our previous editions, this level was expected to act as resistance as it was the important support that the Markets breached on the downside while on its way down. The Markets tested this level on Friday and has gone a notch behind this. In event of today’s expected up move, the Markets are likely to test 7600 levels as well. However, in event of any consolidation and minor profit taking, this level of 7540 will be expected to act as support cone again.

All and all, it also becomes important to note that the Markets have been seeing a sharp pullback from the lows of 7250 it made in recent past. Even if the Markets continue to pullback today as well, it will continue with its pullback but not confirm its recent bottom that it has attempted to form. The Markets have very fiercely attempted to form a short term bottom above 7250 but it is yet to confirm it on Daily Charts. In this scenario, while strictly avoiding shorts, it is advised to continue to make selective purchases while adopting a positive 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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