MARKET OUTLOOK FOR WEDNESDAY, FEBRUARY 01, 2017
Profit taking finally emerged from higher levels perfectly
on analyzed lines as the Markets chose to go into Union Budget on a cautionary
note. The benchmark NIFTY50 ended near the low point of the day posting net
loss of 71.45 points or 0.83%. Today as we face the Union Budget, it is more
than obvious that we will be encountered with large amount of volatility.
Though the NIFTY has ended near the pattern supports, technical levels will be
seen violated on either side today. We expect a range bound trade in the
morning and we will see the Markets reacting once the proposals start rolling
in.
Broadly speaking, the levels of 8672-8700 have now become an
immediate top and therefore resistance levels for the Markets. The supports
come in at 8500 and 8415 levels.
The Relative Strength Index on the Daily Chart is 64.9035
and it remains neutral showing no divergence. It has just crossed below from a
topping formation which is Bearish. The Daily MACD remains bullish trading
above its signal line but it has flattened its trajectory. A black body
on Candles occurring near the resistance / topping area has established
credibility of the resistance zone of 8670-8700 levels.
The NIFTY February series have seen shedding of 4.92 lakh
shares or 2.47% in Open Interest. This makes some profit taking evident from
the higher levels.
Let us now have a look at pattern analysis. As mentioned of
ten, the NIFTY has risen close to 10% in less than a month. The overbought
nature of the Markets made some corrective moves imminent. If we discount the
Union Budget, and if the NIFTY still continues to correct, it would not be
making any damaging move on the Charts. The correction would remain
perfectly healthy, normal and on expected lines. However, given the Union
Budget, we will see some good amount of volatility in the session. Any
downsides up to the levels of 100-DMA will not create or cause any structural
damage on the Charts. Upsides will face immediate resistance at 8670-8700
zones.
Importantly, it is important to note that all
macro economic factors remain very much in place. The liquidity conditions, in
fact, have improved post demonetization as the banks have now become flushed
with funds. Liquidity was never a problem in 2016 and it is not expected to
remain a problem in 2017 as well. Also, the Markets will also closely watch the
issue of Long Term Capital Gains – LTCG which is likely to be flirted with. It
would be positive if LTCG are left in its present condition with no change. Any
change such as introduction of LTCG up to 5% or any proposal to increase of
lock-in tenure from present 1 year to more will invite negative reactions in
the Markets.
We point out at this juncture that technical levels will be
violated on either side because of volatile reactions that are normally
witnessed. It is advised to remain absolutely light and refrain from
creating any serious exposure until a directional bias is established and the
Union Budget is fully digested.
(Milan Vaishnav,
CMT, is Consultant Technical Analyst at Gemstone Equity Research & Advisory
Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)
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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