MARKET OUTLOOK FOR MONDAY, FEBRUARY 06, 2017
The benchmark NIFTY50 heavily consolidated on Friday as it
spent the entire day oscillating in a very narrow 20-odd points range and
finally ending the day flat with minor gains of 6.70 points or 0.08%. Today, as
we go into the fresh week, the Weekly Chart display absolutely buoyant intent
but the Daily Charts remain “overbought”. We are expected to see a stable and
positive opening and we expect the Markets to trade steady in the initial
trade. However, as we go ahead in the session, we might also see some profit
taking from higher levels as corrective actions; however shallow, remain imminent. The lead
indicators on the Daily Charts show some weariness and are overstretched.
The levels of 8750 and 8810 will remain immediate resistance
level for the Markets. The supports come in at 8675 and 8610 levels.
The Relative Strength Index – RSI on the Daily Chart is
72.8722 and it continues to trade in overbought territory. Though it does not
show any failure swing, the NIFTY has marked fresh 14-day which while RSI has
not. This is formed a Bearish Divergence. The Daily MACD stays comfortably
bullish while trading above its signal line. A Spinning Top that has
occurred on the Candles continue to show some indecisiveness on part of market
participants.
The NIFTY February Futures have shed over 1.72 lakh shares
or 0.80% in Open Interest. This shows some minor profit taking at higher levels
but this figure, individually, is insignificant to show any change in underlying
sentiment.
The pattern analysis continues to show overstretched picture
on the Daily Chart. The patterns show very strong undercurrent as the NIFTY is
witnessing very shallow corrections intraday while oscillating in a very capped
range while it continues to remain flat on Close levels. However, it also makes
very evident that the lead indicators show some clear signs of weariness and
possible loss of momentum, though very much temporary. Some signs of fatigue
indicate that there might be some more oscillations within a defined range and
this will be in fact healthy for the Markets.
Overall, the NIFTY continues to track the upper limits of
the Bollinger Bands which are over 40% wider than normal. Under buoyant
circumstances, normally the NIFTY may continue to track it but the overbought
nature of the Markets may see some corrective activities. We recommend using
such dips to make quality purchases by effectively rotating the sectors.
Overall, while some correction would be in fact healthy for the Markets, the
underlying current continues to remain evidently buoyant.
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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