MARKET TREND FOR WEDNESDAY, FEBRUARY 08, 2017
Though with less intensity, first signs of some overdue
correction in the Indian Equities became evident as the benchmark NIFTY50 ended
the day with modest losses of 32.75 points or 0.37%. Today, we expect a subdued
opening in the Markets and the analysis remain more or less on similar lines as
we expect some corrective activities to continue. Markets will also react to
the RBI Credit Policy Review which comes up later as we go ahead in the
session. Rate cut of 25 bps is expected but overall this is likely to remain a
non-event. Bank stocks anyway are trading
extremely overbought and may find any
reason for impending corrective activities. For immediate short term, 8820 has
now become a important resistance to watch out for.
For today, the levels of 8820 and 8865 will act as immediate
resistance levels. The supports will come in lower at 8720 and 8675 levels.
The RSI—Relative Strength Index on the Daily Chart is
71.5979 and it is neutral as it shows no bullish or bearish divergence or any
failure swings. However, it still continues to trade in “overbought” territory.
The Daily MACD remains bullish trading above its signal line but has started to
flatten its trajectory. On the Candles, an Engulfing Bearish Line has
occurred. This is significant because it has formed during an up move and it
markets a potential halt in the current up move. It is an indication that the
momentum has started to shift to bearish hands.
The NIFTY February futures saw shedding of over 2.85 lakh
shares or 1.31% in Open Interest. This shows minor profit taking from higher
levels.
While having a look at pattern analysis, the NIFTY50 is very
near to its major pattern resistance levels. Though these levels fall ahead of
the current closing level, the overbought nature of the Markets is causing
impediments for upward moves. The lead indicators have been overstretched over
past couple of days and this makes the immediate structure of the Markets
slightly dangerous and unhealthy. Though there are no signs of reversal of
trend at current levels, some amount of correction from the current levels
cannot be ruled out.
All and all, it is important to note that corrections within
an uptrend are healthy phenomenon and often prepares Markets for further up
moves. Minor corrective activities are likely to continue but NIFTY may still
proceed to test its logical targets of 8850-8900 mark in coming days. But
currently, given the overbought nature of the Markets, some correction will be
imminent and continues to remain overdue. We continue to reiterate adopting
highly cautious approach to the Markets and vigilantly protect positions at
higher 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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