MARKET TREND FOR MONDAY, MAY 23, 2016
Markets had a weak session on Friday and it
continued to weaken as it tested its 50-DMA levels while ending with losses.
Today, we can see a mild uptick on the Markets and may see some temporary
respite from the downside. Today, we can expect a fairly modest and positive
opening to the Markets. However, the intraday trajectory that the Markets form
would be important to watch out for and so long as it trades below 200-DMA, the
levels of 50-DMA will be critical support for the Markets.
For today, the levels of 7800 and 7835 will
be immediate resistance levels for the Markets. The supports come in at 7725
and then at 7640 levels.
The RSI—Relative Strength Index on the
Daily Chart is 46.63 and it does not show any failure swings. The RSI has not
formed a fresh 14-day low while NIFTY has formed and this show Bullish
Divergence. The Daily MACD is bearish as it continues to trade below its signal
line.
On the derivative front, the NIFTY May
futures have shed over 8.73 lakh shares or 5.29% in Open Interest. This
indicates unwinding of positions continued in the Markets.
Coming to pattern analysis, after resisting
couple of times in the zones of 7970-7990 levels, the Markets took support at
its 200-DMA many times and while doing this, it formed a symmetrical triangle
on the Daily Charts. It saw a downside breakout and has gone on to test its
50-DMA which is 7725 today. Therefore, the level of 200-DMA which stands as
7798 continue to act as resistance in the immediate short term while the level
of 50-DMA, i.e. 7725 will act as immediate support. Any breach below this level
will see some more weakness creeping into the Markets. The RSI has not formed a
lower low and some amount of moderate pullback cannot be ruled out.
Overall, even if a modest pullback is seen,
so long as the Markets trades below its 200-DMA, it will remain vulnerable to
the selling pressure from higher levels. Further, with the current week being
expiry week, some amount of volatility will continue to remain ingrained in the
Markets. While continuing to keep overall exposure in the Markets moderate,
cautious outlook is advised for the day.
Milan
Vaishnav,
Consulting Technical Analyst
Member: Market
Technicians Association, (MTA), USA
Member:
Association of Technical Market Analysts, (ATMA), INDIA
+91-98250-16331
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