MARKET TREND FOR MONDAY, JANUARY 30, 2017
The Equity Markets on Friday traded buoyant on expected
lines while it adjusted itself to strong global equity setup and ended yet another day
with gains. While we open on Monday, we need to take note of two points which
can affect us in very short term. First, the benchmark NIFTY50 came off some
30-odd points before it Closed on Friday showing some mild signs of profit
taking at higher levels and second; it now trades further in “overbought” territory. We expect a quiet
to modestly positive start to the Markets but as we go ahead in the session,
some intermittent corrective action from higher levels just cannot be ruled
out. We face one of the most important domestic external events – Union Budget
– as we go ahead in the week and given the overbought nature of the Markets,
volatility is expected to remain heavily ingrained in the Markets.
For today, the levels of 8675 and 8720 will act as
resistance levels while supports will come in little lower at 8580 and 8515
levels.
The Relative Strength Index – RSI on the Daily Chart is
73.6577 and it does not show any divergence vis-à-vis the price. RSI has formed
a fresh 14-period high which is Bullish but at the same time, it trades in
“overbought” territory. The Daily MACD remains bullish while trading above the
signal line. On the Candles, though not classical, a small upper shadow has
occurred. This might potentially halt the up move in the immediate short term.
However, it needs confirmation today.
On the derivatives front, the NIFTY February has gone on to
further add over 12.20 lakh shares or 6.72% in Open Interest which is positive.
Coming to pattern analysis, the recent levels of 7900-7920
zones have now got confirmed as the near term support for the Markets. The
NIFTY now trades above all of its Moving Averages (50, 100 & 200) which a
positive indication for the immediate short term. While moving up wards, the
NIFTY has taken out some important resistance levels which exist around
8400-8450 zones. In event of any corrective actions or any profit taking bouts
these levels should now act as supports in the near term.
From more than one angle, the NIFTY50 has prepared buoyant
conditions for itself on the Charts. As we had mentioned earlier, buoyant
Markets tend to remain in overbought zones for some time. However, reading the
overbought nature of the Markets along with the external events to whom the
Markets will react to in coming days, it would be wise to remain extremely
vigilant at higher levels. NIFTY may see some more up moves but from here, it
would be more prudent to protect profits vigilantly than making aggressive
purchases. With the underlying conditions intact, any corrective actions or
profit taking bouts will present fresh opportunities to make select purchases.
Milan Vaishnav, CMT
Technical Analyst
(Research Analyst, SEBI Reg. No. INH000003341)
Member:
Market Technicians Association, (MTA), USA
Canadian Society of Technical Analysts, (CSTA), CANADA
+91-98250-16331
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