MARKET TREND FOR TUESDAY, JANUARY 31, 2017
Caution remained very much evident in the Equity Markets as
the NIFTY50 saw movements on either side
and also saw quite evident paring of gains from the high point of the day.
While coming off from the intraday high levels very much on expected lines, the
NIFTY ended the day with nominal loss of 8.50 points or 0.10%. Today as we go
into the session, we expect this caution to remain heavy and evident. We expect
a soft to mildly negative opening in the Markets and it would not be any
surprise if we see some profit taking continuing to take place once again.
Given the rise and the structure of the Markets, any corrective activity would
be healthy given the overbought nature of the Markets.
For today, 8670 and 8735 will pose resistance while the
supports will come in lower at 8575 and 8520 levels.
The Relative Strength Index – RSI on the Daily Charts is
72.6825 and it remains neutral showing no divergence on either side. However,
it continues to trade in overbought territory. The Daily MACD stays bullish
while trading above it signal line an it is expected to slightly flatten its
trajectory. A Spinning Top has occurred on the Candles which often
represents caution and indecisiveness on part of participants and often
potentially halts the up moves.
The NIFTY February futures have gone on to further add over
5.50 lakh shares or 2.84% in Open Interest.
If we look at pattern analysis, we observe that with
intermittent consolidations the NIFTY has recovered almost 779 points or nearly
10% from the lows that it formed December 2016 within span of just over a
month. Given such rise and the lead indicators being overbought, any
consolidation for a longer time or any corrective action in form of profit
taking should not come as a surprise. The overall structure of the NIFTY
remains intact as it trades above all of its moving averages. Even if some
corrective retracement is seen, it would be in fact healthy for the Markets in
the long term.
Overall, the reason that we are likely to see some
corrective activities is that Bond yields globally have spiked up a bit once
again. On one hand as we face one of the most volatile domestic events like
Union Budget, on the other hand we are left to grapple with such external
technical reasons like stiffening of the bond yields as well. Picking up
individual stocks and adopting highly selective and stock specific approach will
remain crucially important to deal with such technical situations. Along with
this, continuation of protection profits at higher levels while adopting
cautious approach is advised for today.
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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