MARKET TREND FOR THURSDAY, FEBRUARY 16, 2017
The Indian Equities traded precisely on projected lines and
after fierce consolidation at close levels, it saw some correction as well while
it ended the day with a loss of 67.60 points or 0.77%. It becomes important to
note at this juncture that this corrective activity was imminent and long
overdue and in fact will turn out to be healthy for the Markets going ahead. Today, we
can expect a subdued opening and the spiking of the US Bond Yields may still
have its lingering effect on Indian Equities but in the immediate short the
Markets have limited downsides and may turn up again after brief corrective
action. While a subdued opening is expected, Markets are likely to find strong
supports at lower levels and might improve as we go ahead in the session.
Resilience is expected for the Markets and more so given the buoyant set-up of
the correlated peers as well.
For today, the levels of 8775 and 8830 will continue to act
as immediate resistance levels. The supports will come in at 8690 and 8665
levels.
The Relative Strength Index – RSI on the Daily Chart is
62.7479 and it has just crossed below from a topping formation. Also it has
reached its lowest value in last 14-periods which is Bearish. A Bearish
Divergence is also seen as the RSI has set a fresh 14-period low while the
NIFTY has not yet. The Daily MACD has reported a negative crossover and it now
trades below its signal line. We had projected this happening in our
yesterday’s note.
On the other hand, the NIFTY February futures have added
over 17.40 lakh shares or whopping 7.45% in Open Interest which very clearly
indicates creation of massive short positions in the system.
The pattern analysis paints a obvious picture. After
oscillating in a broad range and with flat endings at Close levels, the NIFTY
was witnessing fierce consolidation over last six sessions. Some corrective
activity was imminent as the NIFTY was also trading in overbought terrain
during this time. Any up move without any correction would have taken Markets
higher but would have made them equally unhealthy. The corrective action that
we witnessed yesterday will in fact prove to be healthy for the Markets in the
immediate short term.
All and all, though the lead indicators show some
persistence of weakness and some amount of pressure may also persist because of
spike in US Bond Yields in last two sessions, we expect limited downsides to
the Markets. Any downsides that we may see might be temporary as the NIFTY has
added huge amount of shorts over last two days. While remaining light on
overall positions, we also advice refraining from creating any major short
positions as short squeeze may occur at lower levels. While maintaining cash
and liquidity, modest purchases may be made at lower levels.
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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