Daily Market Trend Guide -- Thursday, February 04, 2016

MARKET REPORT                                                                              February 04, 2016

Though the Markets opened lower following global weakness, it showed some resilience during the most part of the trading session but ended yet another day with losses following last hour deepening of cuts. The Markets saw a near gap down opening while taking cue from the Asian markets but for the entire morning session and for the most part of the afternoon trade, it exhibited good amount of resilience. Though the Markets continued to remain in a very capped range, it had remained in slightly upward rising trajectory while attempting to recover most of its opening losses. However, the last hour of the trade did most of the undoing as the Markets slipped and saw a near-vertical decline once again and went on to form the day’s low of 7350.30. It finally settled the day at 7361.80, posting a net loss of 93.75 points or 1.26% while forming a sharply lower top and lower bottom on the Daily Bar Charts.

MARKET TREND FOR THURSDAY, FEBRUARY 04, 2016

After the Markets have shaved off over 200-odd points in last three sessions, we are likely to see some respite from the weakness that we have been seeing recently. We can expect the Markets to open on a fairly stable note. However, there are two things that we need to take note of. One, it would be critically important for the Markets to sustain expected opening gains and; two, the levels of 7540 will continue to pose major resistance in the immediate short term.

For today, the levels of 7410 and 7445 will act as immediate resistance for the Markets. The supports come in at 7320 and 7250 levels.

The RSI—Relative Strength Index on the Daily Chart is 38.9922 and it remains neutral as it shows no bullish or bearish divergence or any failure swings. The Daily MACD continues to remain bullish as it trades above its signal line.

On the derivative front, the NIFTY February futures have added over 1.29 lakh shares or 0.67% in Open Interest. This indicates creation of some minor shorts in the system.

If we take a look at pattern analysis, we have been mentioning in our previous editions that what we have seen is a mere technical pullback and there have been no signs of “confirmation” of bottom. This keeps us vulnerable to selling bouts from higher levels. This happened precisely as the Markets resisted near 7540 levels and came off over 200-odd points from there. As of now, though the Markets are expected to take support around these levels and it is not expected to make fresh lows but until a definite bottom is formed and confirmed, the Markets will continue to remain vulnerable to selling bouts from higher levels and the levels of 7540 will continue to act as immediate resistance for the Markets.

Overall, though the Markets are expected to see a decently positive opening, it would be important to see if it sustains this and is able to capitalize on it. In any case, with the levels of 7540 acting as important resistance levels, the Markets are likely to oscillate in a broad range and will see some amount of volatility remaining ingrained in the Markets. While avoiding over-exposure in the Markets cautious outlook should be continued for today.

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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