Daily Market Trend Guide -- Thursday, February 02, 2017

MARKET OUTLOOK FOR THURSDAY, FEBRUARY 02, 2017

After the first half of the trading session remaining heavily range bound, the Markets gave an thumbs-up to the Union Budget and went on to end the day with a robust gain of 1550.10 points or 1.81%. The Budget was perceived from neutral to positive by the Markets. Some important points remained giving infra status to the affordable housing, lowering of personal income tax rate, not flirting with the Long Term Capital Gains in the financial markets, increasing allocations that would benefit housing, infrastructure, rural spending, etc. We will now need to approach Markets from a different perspective. We expect a stable opening today and there is no doubt that buoyancy will continue to persist but in the second half of the session, we will have to remain cautious as there can be some possible profit taking and also the fact that  the NIFTY50 once again trade in overbought zone. The euphoria now needs to be approached with positive caution.

For today, the levels of 8745 and 8785 will remain resistance levels for the Markets. The supports come in much lower at 8665 and 8565 levels.

The Relative Strength Index – RSI on the Daily Chart stands at 71.9273 and it shows no failure swings. It now trades in “overbought” territory and also shows Bearish Divergence as NIFTY has formed a fresh 14-day high while RSI has not. The Daily MACD stays bullish trading above its signal line. On the Candles,  a big white candle has been formed. It is important to note that NO formations like Engulfing Candles have been observed which otherwise holds possibility of halting any uptrend.

The NIFTY February futures have added over 14.13 lakh shares or 7.27% in Open Interest which is quite buoyant indication.

While having a look at pattern analysis, two things are quite evident. First, the overall trend and underlying buoyancy continue to remain absolutely intact. On the other hand, the NIFTY is tracking the upper band of the Bollinger Band. Though this shows buoyancy, the overbought nature of the Markets may cause some consolidation to occur at higher levels. Therefore, a euphoric reaction may continue to persist and the trend may remain originally intact, but some minor profit taking and shallow correction cannot be ruled out.

Overall, it would be time that one uses the up moves to protect profits in the existing investments. Some structural changes and sectoral moves will be observed and some sector rotation will remain evident. We advice not to euphorically chase the up move but instead use any available opportunity to book profits at higher levels. Consolidation is expected and this should be effectively used to make fresh select purchases.

(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

www.EquityResearch.asia

http://milan-vaishnav.blogspot.com

+91-98250-16331 

milan.vaishnav@equityresearch.asia

milanvaishnav@yahoo.com

Daily Market Trend Guide -- Wednesday, February 01, 2017

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

www.EquityResearch.asia

http://milan-vaishnav.blogspot.com

+91-98250-16331 

milan.vaishnav@equityresearch.asia

milanvaishnav@yahoo.com

Daily Market Trend Guide -- Tuesday, January 31, 2017

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

www.EquityResearch.asia

http://milan-vaishnav.blogspot.com

+91-98250-16331 

milan.vaishnav@equityresearch.asia

milanvaishnav@yahoo.com

Daily Market Trend Guide -- Monday, JANUARY 30, 2017

MARKET TREND FOR MONDAY, JANUARY 30, 2017

The Equity Markets on Friday traded buoyant on expected lines while it adjusted itself to strong  global equity setup and ended yet another day with gains. While we open on Monday, we need to take note of two points which can affect us in very short term. First, the benchmark NIFTY50 came off some 30-odd points before it Closed on Friday showing some mild signs of profit taking at higher levels and second; it now trades further  in “overbought” territory. We expect a quiet to modestly positive start to the Markets but as we go ahead in the session, some intermittent corrective action from higher levels just cannot be ruled out. We face one of the most important domestic external events – Union Budget – as we go ahead in the week and given the overbought nature of the Markets, volatility is expected to remain heavily ingrained in the Markets.

For today, the levels of 8675 and 8720 will act as resistance levels while supports will come in little lower at 8580 and 8515 levels.

The Relative Strength Index – RSI on the Daily Chart is 73.6577 and it does not show any divergence vis-à-vis the price. RSI has formed a fresh 14-period high which is Bullish but at the same time, it trades in “overbought” territory. The Daily MACD remains bullish while trading above the signal line. On the Candles, though not classical, a small upper shadow has occurred. This might potentially halt the up move in the immediate short term. 

However, it needs confirmation today.

On the derivatives front, the NIFTY February has gone on to further add over 12.20 lakh shares or 6.72% in Open Interest which is positive.

Coming to pattern analysis, the recent levels of 7900-7920 zones have now got confirmed as the near term support for the Markets. The NIFTY now trades above all of its Moving Averages (50, 100 & 200) which a positive indication for the immediate short term. While moving up wards, the NIFTY has taken out some important resistance levels which exist around 8400-8450 zones. In event of any corrective actions or any profit taking bouts these levels should now act as supports in the near term.

From more than one angle, the NIFTY50 has prepared buoyant conditions for itself on the Charts. As we had mentioned earlier, buoyant Markets tend to remain in overbought zones for some time. However, reading the overbought nature of the Markets along with the external events to whom the Markets will react to in coming days, it would be wise to remain extremely vigilant at higher levels. NIFTY may see some more up moves but from here, it would be more prudent to protect profits vigilantly than making aggressive purchases. With the underlying conditions intact, any corrective actions or profit taking bouts will present fresh opportunities to make select purchases.

Milan Vaishnav, CMT 

Technical Analyst 

(Research Analyst, SEBI Reg. No. INH000003341)

Member: 

Market Technicians Association, (MTA), USA

Canadian Society of Technical Analysts, (CSTA), CANADA

www.EquityResearch.asia

http://milan-vaishnav.blogspot.com

+91-98250-16331 

milan.vaishnav@equityresearch.asia

milanvaishnav@yahoo.com

Weekly Technical Note - NIFTY - January 30 thru February 03, 2017

WEEKLY MARKET OUTLOOK FOR JANUARY 30 THRU FEBRUARY 03, 2017

The overbought NIFTY50 continued to post gains for the fourth day in a row as it ended the Week on a robust note by posting gains of 290.90 points or 3.50% on week-on-week basis. The ending of the previous week has thrown up extremely divergent signals on the Daily and Weekly Charts. We expect a modest opening to the Markets on Monday. Not only the NIFTY50 trades overbought on the Daily Charts and faces pressure from external technical factors like potential rise of US Dollar Index and spike in US Bond Yields, it has thrown up extremely bouyant signals on the Weekly Charts. On the top of it, we face one of the most important event – Union Budget – that comes up on February 01. This has made one thing very obvious that volatility will rule the roost and in all probability we will witness swings on either side dominated by profit taking activities.

For the coming week, 8690 and 8785 will act as resistance levels while supports will come in at 8610 and 8520 levels.

The Relative Strength Index – RSI on the Weekly Chart is 59.0386 and it has reached its highest value in last 14-days which is Bullish. It does not show any bullish or bearish divergence. The Weekly MACD has reported a positive crossover and this now trades above its signal line and is Bullish. On the Candles, an engulfing bullish line has occurred. This formation has occurred during an up move and therefore, this has potential to halt the current up move and force the Markets into some correction or consolidation.

While having a look at pattern analysis, this shows quite divergent views as well. The  usual visual inspection of the Weekly Charts suggest all likelihood of the NIFTY progressing towards 8800-mark. On the other hand, the engulfing pattern on the Candles show probability of the up move being interrupted in the immediate short term. Though the lead indicators on the Weekly Charts have shown positive crossovers and upward inclination, the NIFTY trades very much overbought on the Daily Charts which will not allow any unaway rise in the Markets.

Overall, given the divergent readings on the Daily and Weekly Charts, we now strongly advise to raise the levels of caution. The Union Budget which falls withing this week will infuse great amount of volatility and the profit taking bouts on higher levels now remain imminent. We many not see any major correction but the volatility will remain and that too in a wider range. We strongly reiterate to remain light and refrain from creating any major exposure and continue to use all the up moves in protecting profits at higher levels.

A study of Relative Rotation Graphs – RRG continue to suggest that IT Sector is likely to relatively outperform the NIFTY. Though some churning of individual components will be seen and some paring of momentum is likely in IT, relative outperformance is expected to continue. The FMCG and INFRA stocks are likely to show continued momentum and selective relative outperformance will be see. We will also see select REALTY stocks attempting to consolidate and improve their performance. Metals and Banks may also show slowing of momentum and select components from MEDIA and broader Indices are likely to under-perform. We can also expect some relative underperformance from PHARMA as well.

Important Note: RRG™ charts show you the relative strength and momentum for a group of stocks. In the above Chart, they show relative performance as against NIFTY Index and should not be used directly as buy or sell signals.

(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

www.EquityResearch.asia

http://milan-vaishnav.blogspot.com

+91-98250-16331 

milan.vaishnav@equityresearch.asia

milanvaishnav@yahoo.com

Daily Market Trend Guide -- Friday, JANUARY 27, 2017

MARKET TREND FOR FRIDAY, JANUARY 27, 2017

Indian Equity Markets will open today after a day of holiday on account of Republic day yesterday. In  the Wednesday’s session, the benchmark NIFTY50 made a  perfectly projected up move as it not only tested 8550-mark but went on to end at 8602.75 posting a rubust uptick of 126.95 points or 1.50%. While we open today, we will see our Markets adjusting to an extremely buoyant global equity set up. Dow Jones moved past 20,000-mark for the first time and the European and Asian peers trade buoyant. We can certainly expect yet another uptick in the Markets today and expect a buoyant start. However, there are all chances that we see some profit taking coming in from higher levels while we go ahead in the session as we now trade in “overbought” zone.

For today, the levels 8635 and 8660 will act as immediate resistance levels. Supports will come in at 8550 and 8525 levels.

The Relative Strength Index—RSI on the Daily Charts is 72.0822 and it has reached its highest value in last 14-days which is Bullish. It does not show any bullish or bearish divergence vis-à-vis the price but it now trades in “overbought” territory. The Daily MACD stays bullish while trading above its signal line. On the Candles, a Rising Window occurred. 

This is typically a gap wherein the day’s low is higher than the previous high and it often indicates continuation of uptrend.

The NIFTY February futures saw addition in net open interest indicating creation of fresh long positions in the NIFTY and across the board as well.

If we look at pattern analysis, it presents a divergent picture. On the Daily Charts, the NIFTY now trades extremely buoyant but at the same time it trades in overbought territory and shows some chances of correction from higher levels. On the Weekly Charts, the NIFTY has shown strong tendencies to move ahead and eventually test much higher levels. Given this divergent reading, it may happen that we might see some profit taking at higher levels. Though we expect a buoyant opening today, some paring of gains at higher levels cannot be ruled out. However, given the buoyant set up on the Weekly Charts, such corrections may remain shallow.

Also important to note is that even if the Markets trade in “overbought” territory, this will not be the only reason that can cause any corrective activity. Markets do tend to remain overbought in buoyant environments. However, the holistic reading of the Charts surely suggests that we now need to shift our focus on protecting profits at higher levels. The possible uptick on the US Dollar Index and spiking of US Bond Yields may exert some pressure again on the Equities. So, overall, we advice to lay more emphasis on booking and protecting profits at higher levels and adopt mildly cautious outlook on the Markets.

Milan Vaishnav, CMT 

Technical Analyst 

(Research Analyst, SEBI Reg. No. INH000003341)

Member: 

Market Technicians Association, (MTA), USA

Canadian Society of Technical Analysts, (CSTA), CANADA

www.EquityResearch.asia

http://milan-vaishnav.blogspot.com

+91-98250-16331 

milan.vaishnav@equityresearch.asia

milanvaishnav@yahoo.com