Gemstone Equity Research &amp; Advisory Services

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Friday, December 8, 2017

MARKET OUTLOOK FOR FRIDAY, DEC 08, 2017

MARKET OUTLOOK FOR FRIDAY, DEC 08, 2017

The Indian Equity Markets witnessed a robust short covering on Thursday as the NIFTY ended the session with a decent gain of 122.60 points or 1.22%. We had mentioned about this imminent pullback in our previous note. However, the interesting part of Thursday’s session is that despite very large number of Open Interest the rise of 122.60 points has resulted into only a minor reduction of OI. Going into trade on Friday, though we expect a quiet start, we expect the follow-through rally to continue with the levels of 100-DMA acting as important support.

The levels of 10200 and 10265 will act as immediate resistance levels for the Markets. Supports come in at 10075 and 10020 zones.

The Relative Strength Index – RSI on the Daily Chart is 45.0210 and it remains neutral while holding on and reversing from its Double Bottom support. The Daily MACD is still bearish as it trades below its signal line. A Big White candle emerged and it is significant as it has emerged near the strong support area of 100-DMA.

The pattern analysis confirmed the validity of the support of 100-DMA as the Markets recovered after a minor breach and by not violating its filters. Going further from here, to the most likelihood, a fresh Intermediate Area Pattern in form of a falling channel is created and we may see the Markets behaving in this formation.

All and all, the resultant formation of the Intermediate Pattern in form of a falling channel is likely to inflict lower tops in the Markets. However, as of now, we expect the pullback rally to see follow-through on Friday and expect it to continue. We continue to see stock specific performances coming out from AUTO, INFRA and Financial Services stocks. We continue to recommend making select purchases while avoiding shorts and also protecting profits at higher levels.

Milan Vaishnav, CMT, MSTA

Technical Analyst

(Research Analyst, SEBI Reg. No. INH000003341)

Member:

CMT Association (Formerly known as Market Technicians Association, (MTA), USA

Canadian Society of Technical Analysts, (CSTA), CANADA

Society of Technical Analysts (STA), UK

+91- 70164-32277 / +91-98250-16331

Thursday, December 7, 2017

MARKET OUTLOOK FOR THURSDAY, DEC 07, 2017

MARKET OUTLOOK FOR THURSDAY, DEC 07, 2017

In Monetary Policy Review on Wednesday, the RBI kept all key ranges unchanged. Though this was widely expected, the Equity Markets did not show much enthusiasm as the session remained weaker-than-expected. The benchmark NIFTY50 saw yet another decline and ended the day below but within the filters of the 100-DMA losing 74.15 points or 0.73%. Going into trade tomorrow, the Markets awaits a imminent technical pullback. In most probability, the levels of 100-DMA should hold out as supports at Close levels. Sooner the Markets move past this 100-DMA mark, better it will be able to avoid any serious weakness from creeping in.

The levels of 10075 and 10125 will play out as immediate resistance levels while supports come in at 10000 and 9930.

The Relative Strength Index – RSI on the Daily Charts is 33.5296 and it has marked a fresh 14-period low which is bearish. It does not show any divergence against the price and rests at Double Bottom support at current levels. No significant formations were observed on Candles.

Pattern analysis confirms the levels of 10410 as a lower top for the Markets over past couple of days and the NIFTY has seen a consistent decline. Currently it has ended slightly below the 100-DMA mark but stays within its filters.

The levels of 100-DMA remain significant from ways more than one. The NIFTY had crawled back above the 100-DMA mark in the end of January 2017 and has remained above this mark for entire part of 2017 as of now. Though there were minor breaches but the NIFTY has continued to take support at this DMA. As of today, the VIX has tested its previous resistance while the lead indicator RSI has marked a Double Bottom support. All this point towards increased possibility of an imminent pullback that the Market is awaiting.

To further this, there are also large number of shorts that await covering up at lower levels. Taking a broader view of all these, we recommend avoiding shorts completely and look for bargain purchases at lower levels.

Milan Vaishnav, CMT, MSTA

Technical Analyst

(Research Analyst, SEBI Reg. No. INH000003341)

Member:

CMT Association (Formerly known as Market Technicians Association, (MTA), USA

Canadian Society of Technical Analysts, (CSTA), CANADA

Society of Technical Analysts (STA), UK

+91- 70164-32277 / +91-98250-16331

Wednesday, December 6, 2017

MARKET OUTLOOK FOR WEDNESDAY, DEC 06, 2017

MARKET OUTLOOK FOR WEDNESDAY, DEC 06, 2017

In our previous note, we had expected 100-DMA to stand as important support for the Markets and had also not expected the Markets to show any runaway rise. In line with this analysis, the benchmark NIFTY recovered smartly from the lows of the day taking support at the levels very near to 100-DMA. It ended the session with minor loss of 9.50 points or 0.09%. Going into trade on Wednesday, the broader levels to watch for remain the same. Critical support is expected at the 100-DMA which stands today at 10070 while up moves will face resistance in the 10180-10200 zones.

Given these resistance levels of 10180-10200 zones, any movement past these levels will see some short term momentum in the Markets. We expect a modestly positive to flat start to the day on Wednesday and the Markets are expected to attempt an technical pullback after finding base around current levels.

The Relative Strength Index – RSI on the Daily Chart is 37.9889 and it has marked its lowest value in last 14-days which is bearish. It shows no divergence against the price. The Daily MACD stays bearish while trading below its signal line.

On the candles a Doji has emerged. Occurrence of Doji can be significant and not-so-significant depending upon the place of its occurrence. The current formation of a Doji is relatively significant because of two reasons. The NIFTY has tested its lower Bollinger Band value and also this coincides with the 100-DMA which is a major support level for the Market in the immediate short term. Reading the occurrence of Doji in this context, we can expect it to cause a technical pullback.

The Markets in general will also react to RBI’s Monetary Policy Review. RBI is expected to keep the rates unchanged and skip this time and lower it due to current inflation levels. But this being aside, it is very much likely that the Markets may continue to remain in a range with a bias towards some pullback. In event of any downsides, the levels of 100-DMA will act as a potent support. Continuing to remain highly stock specific and maintaining modest exposures is what is advised for the day.

Milan Vaishnav, CMT, MSTA

Technical Analyst

(Research Analyst, SEBI Reg. No. INH000003341)

Member:

CMT Association (Formerly known as Market Technicians Association, (MTA), USA

Canadian Society of Technical Analysts, (CSTA), CANADA

Society of Technical Analysts (STA), UK

+91- 70164-32277 / +91-98250-16331

Tuesday, December 5, 2017

MARKET OUTLOOK FOR TUESDAY, DEC 05, 2017

MARKET OUTLOOK FOR TUESDAY, DEC 05, 2017

Much on the expected lines, the Indian Equity Markets saw some respite from the weakness that it was seeing over past couple of sessions. The NIFTY50 remained range bound all throughout the day and ended the session on a flat note putting negligible gains of 5.95 points or 0.06%. Also, we had mentioned about the levels of 10180-10200 playing out as immediate resistance for the Markets. The Index resisted precisely at 10179 and retraced from there. Stepping into trade for Tuesday, these levels of 10180-10200 will continue to pose immediate resistance for the Markets while the levels of 100-DMA will stand as important and critical supports in event of any weakness.

The 10165 and 10200 will act as immediate resistance for the Markets. Supports come in at 10067 which is the 100-DMA for the Markets.

The Relative Strength Index – RSI on the Daily Chart is 38.5997 and it stays neutral showing no divergences against the price. The Daily MACD is still bearish as it trades below its signal line. No significant formations were seen on Candles.

The pattern analysis shows possibility of a minor Double Bottom support shaping up near 10100. The 100-DMA remains in very close vicinity of this and therefore, in immediate short term, we are unlikely to see any significant downsides.

Overall, the rising Open Interest that has been coming in over previous two sessions also point towards building shorts in the system. These shorts are likely to lend supports at lower levels. However, as of now what we can expect is a technical pullback only. Resumption of up move shall occur only once the NIFTY moves past the levels of 10180-10200. Until this happens, while completely avoiding shorts, we continue to recommend keeping exposures moderate and adopting a cautious view on the Markets.

Milan Vaishnav, CMT, MSTA

Technical Analyst

(Research Analyst, SEBI Reg. No. INH000003341)

Member:

CMT Association (Formerly known as Market Technicians Association, (MTA), USA

Canadian Society of Technical Analysts, (CSTA), CANADA

Society of Technical Analysts (STA), UK

+91- 70164-32277 / +91-98250-16331

Monday, December 4, 2017

MARKET OUTLOOK FOR MONDAY, DEC 04, 2017

MARKET OUTLOOK FOR MONDAY, DEC 04, 2017

The Friday’s session remained dominated with bearish undertone as the Markets extended its losses in the second half of the trade while the NIFTY closed with a net loss of 104.75 points or 1.02%. NIFTY has slipped below its 50-DMA which stand at 10183. Going into trade on Monday, the Markets are poised at a little tricky situation. We might see a very modestly positive to flat opening on Monday. Shorts are seen being added to the system. Given the fact that the 100-DMA remain in close vicinity at 10063, Markets may attempt to take a respite from the current spate of weakness. On the other hand, the levels of 10180-10200 will pose a stiff resistance on the upside.

The levels of 10165 and 10210 will act as immediate resistance levels for the Markets. The supports come in at 10060 and 9975 zones.

The Relative Strength Index – RSI on the Daily Chart is 38.0201. It has marked a fresh 14-period low which is bearish. It also shows bearish divergence as the RSI has marked fresh 14-period low while the NIFTY has not. Daily MACD stays bearish while trading below its signal line.

The pattern analysis confirms the creation of 10410 as a lower top for the Markets. It would be important to see how the Markets behave vis-à-vis the 100-DMA. In this year, the NIFTY has taken support around 100-DMA multiple number of times.

The brighter point from the Friday’s session was that the overall volumes in the Markets remained much lower than the previous session. With the addition in the Open Interest with the decline in the volumes, we can hope that the selling is fading out. This may not immediately halt the downsides but certainly, we can expect the Markets to attempt to take respite and find some immediate base. We recommend avoiding shorts and keeping overall exposures moderate while keeping a cautious view on the Markets.

Milan Vaishnav, CMT, MSTA

Technical Analyst

(Research Analyst, SEBI Reg. No. INH000003341)

Member:

CMT Association (Formerly known as Market Technicians Association, (MTA), USA

Canadian Society of Technical Analysts, (CSTA), CANADA

Society of Technical Analysts (STA), UK

+91- 70164-32277 / +91-98250-16331

Sunday, December 3, 2017

WEEKLY MARKET OUTLOOK FOR DEC 04 THRU DEC 08, 2017

WEEKLY MARKET OUTLOOK FOR DEC 04 THRU DEC 08, 2017

In the Week that has gone by, the Indian Equities remained weak as the benchmark Index NIFTY ended the week with net Weekly loss of 267.90 points or 2.58%. The previous week, has by far remained one of the weaker ones in the recent past. In our previous Weekly technical note, we had mentioned about the levels of 10346-10365 acting as major resistance to the Markets. We had also mentioned about the persistent bearish divergence of the lead indicators likely leading to weakness in the near term. For the coming week, given the fact that shorts have started to get built up in the system, minor pullback may be attempted but in any case, significant up move is very less likely, at least in the immediate short term.

The levels of 10210 and 10365 will act as immediate resistance levels in the coming week. The supports will come in at 10050 and 9910 zones.

The Relative Strength Index – RSI on the Weekly Chart is 56.0154 and remains neutral against the price. The Weekly MACD has reported a negative crossover and it is now bearish while trading below its signal line. A Big Black Candle that has emerged from near the 10345-10365 has established the credibility of these resistance levels.

While having a look at pattern analysis, it is evident that the 22-month long trend line has posed serious resistance to the Markets. The lead indicators, which otherwise remain neutral to the price, have continued to form lower tops while the Markets was attempting higher levels. All this cumulatively resulted into bearish divergence on the Weekly Charts.

The lead indicators usually foretell the coming price action. It was expected since couple of weeks that some corrective actions were imminent in the immediate short term. Now when the Markets are actually in a corrective mode, fresh short positions have started to resurface again. If we attempt to take a holistic view of the Markets, such fresh shorts may start providing supports at lower levels and the Markets may attempt some technical pullbacks. However, in any given case, any significant up move is very less likely. Overall, next week will remain highly stock specific and it is recommended to keep overall exposures moderate and adopt a cautious view on the Markets.

A study of Relative Rotation Graphs – RRG evidently show that the METAL pack which was showing leadership over past couple of weeks will now take a back seat and will continue to under-perform along with FMCG and PHARMA. Relative out-performance will now be expected from MIDCAP universe assisted with sectors like PSU Banks, Public Sector Enterprises, INFRA and some select stocks from REALTY. Autos are likely to continue to consolidate. MEDIA pack will continue to gather strength and may remain resilient in event of general Market weakness.

(Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia

Milan Vaishnav, CMT, MSTA

Technical Analyst

(Research Analyst, SEBI Reg. No. INH000003341)

Member:

CMT Association (Formerly Market Technicians Association, (MTA), USA

Canadian Society of Technical Analysts, (CSTA), CANADA

Society of Technical Analysts, STA (UK)

+91-70164-32277 / +91-98250-16331