Daily Market Trend Guide -- Monday, February 15, 2016

MARKET REPORT                                                                                  February 15, 2016

Markets had a deeply volatile session on Friday as it plunged to its fresh 52-week lows but recovered during the day to end flat with nominal gains. The Markets saw a modestly positive opening but this opening was bit weaker than what it was expected. After briefly trading into the green the Markets slipped into negative territory. By the first half of the session, the Markets had made its fresh 52-week lows as it formed its day’s low of 6869. However, the second half of the session saw bit of short covering coming in. The Markets attempted to recover and at one point recovered all of its losses to trade in the positive territory. It also went on to form the day’s high of 7034.80. After hovering around those levels, it came off a bit and settled the day at 6980.95, posting a minor gain of 4.60 points or 0.07% but continued to form a sharply lower top and lower bottom on the Daily Bar Charts.

MARKET TREND FOR MONDAY, FEBRUARY 16, 2016

We had pointed out in our Friday’s edition that the Markets may find a short term bottom for themselves. Though fresh intraday lows were observed in Friday’s session but at Close levels, the Markets have ended flat. Today, we can expect the Markets to open on a decently positive note and continue with its pullback that it initiated in the second half of the Friday’s session. However, once again, sustenance of opening gains and the key levels of 7240 would be the two critical things to watch out for in coming sessions.

For today, the levels of 7030 an 7045 will act as immediate resistance levels for today. The support would come in at 6920 and 6875 levels.

The RSI—Relative Strength Index on the Daily Chart is 28.0910 and though it does not show any bullish or bearish divergence or failure swings, it trades in “oversold” territory. The Daily MACD is bearish as it trades below its signal line. On Candles, a long lower shadow occurred which often signals bullish reversal for immediate short term if it occurs near support levels or when a security is “oversold”.  On the Weekly Charts, the Weekly RSI is 31.0747 and it has reached its lowest level in last 14-weeks which is bearish. It does not show any bullish or bearish divergence. The Weekly MACD is bearish as it trades below its signal line.

On the derivative front, the NIFTY February futures have added further over 10.71 lakh shares or 5.43% in open interest indicating further addition of short positions in the Markets.

Coming to pattern analysis, the Markets have tested one of the most important levels in recent times. On Friday, it took intraday support at 200-DMA on the Weekly Charts. It saw a sharp short covering rally once it tested those levels. It is important to note that this is one of the major pattern support and if breached on the lower side will take the Markets into quite good amount of bearish mode for the immediate short term. Coming back to analysis on Daily Chart, the Markets breached the levels of 7240, its previous 52-week low while on its way down. While pulling up, its logical resistance will be the levels of 7240. This level will be the important level to watch out for.

All and all, the Markets are likely to open positive and continue with its pullback. If the pullback continues in the immediate short term, the immediate resistance levels for the Markets will be 7240. It is likely that the Markets pullback strongly and finds resistance at 7240. It is important to note that the Markets may face pullback as it has once again attempted to find a bottom but it will show no signs of confirmation even if it sustains the pullback today. Given this fact, though selective purchases may be made, extremely caution is advised at higher levels for today and days to come.

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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