Daily Market Trend Guide -- Tuesday, February 16, 2016

MARKET REPORT                                                                              February 16, 2016

Markets saw a very sharp short covering led pullback and ended the day with smart gains after a day of stable up move. The Markets saw a gap up opening following strong Asian Markets. After opening gap-up, the Markets successfully sustained its gains as it saw a one-way stable rally as the Markets kept forming fresh intraday highs during the day. While pulling towards its logical expected levels of 7240, Markets remained in upward rising trajectory throughout the day. Since the up move was sustained, it formed its intraday high of 7182.80 towards the end of the session in the final hour of the trade. The levels were maintained and the Markets finally ended the day at 7162.95, posting a decent gain of 182 points or 2.61% while forming a sharply higher top and higher bottom on the Daily Bar Charts.

MARKET TREND FOR TUESDAY, FEBRUARY 16, 2016

Markets witnessed a very sharp technical pullback yesterday. Today as well, we can expect a fairly positive start to the Markets and they are likely to continue with its yesterday’s pullback. Having said this, we again refer to our yesterday’s edition wherein we had mentioned that the logical target and resistance to the Markets may occur at 7240 levels. 

Today’s opening is likely to see the Markets trading around these levels and it would be critically important to see the behavior vis-à-vis these levels.

For today, the levels of 7240 and 7275 will act as immediate resistance levels for the Markets. The supports exist at 7110 and 7045 levels.

The RSI—Relative Strength Index on the Daily Chart is 39.2295 and it remains neutral as it shows no bullish or bearish divergence or any failure swings. The Daily MACD remains bearish as it trades below its signal line.

On the derivative front, the NIFTY February futures have shed over 4.01 lakh shares or 1.93% in Open Interest. This confirms some amount of short covering in the Markets. The NIFTY PCR stands at 0.805 as against 0.78.

While having a look at pattern analysis, the Markets breached its previous 52-week low of 7240 levels and this level is likely to act as resistance on its way up. The Markets, with its extent of expected positive opening will open very near to this level and it would be critically important to how it reacts around 7240. Some amount of consolidation / mild selling cannot be ruled out at 7240 and beyond. The Markets, though they have pulled back very sharply, have not confirmed its bottom formation as yet and it continues to remain vulnerable to sell-offs at higher levels. Further, even if it continues to pullback beyond 7240 for some time, it would continue to remain in overall downtrend as it is yet to form a definite bottom and confirm it.

Overall, with the Markets likely to continue to show upticks in the initial trade, it is advised to make fresh purchases on highly selective basis and at very moderate levels. Since the directional bias is not established because what we are seeing are mere technical pullbacks, the exposures should be limited to quality stocks with very high vigil at higher levels.  With a view to maintain liquidity and to keep exposures at modest levels, positive caution is advised for the day.

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

+91-98250-16331
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