Gemstone Equity Research & Advisory Services

Wednesday, February 15, 2012

Daily Market Trend Guide -- Wednesday, F ebruary 15, 2012

MARKET TREND FOR TODAY February 15, 2012

The Markets yesterday continued to post rise, continuing to keep itself at dangerous and overbought condition as it ended the day with modest gains after spending the entire session in a capped and range bound manner. The Markets opened on a mildly negative note and gave its intraday low in the early minutes of the trade. Thereafter, it came into positive and spent the entire session in a sideward 25-point capped range. It saw some typical spurt in the last half hour of the trade and it ended the day at 5416.05, posting yet another modest gain of 25.85 points or 0.48%. In the process, it has formed a similar top and a higher bottom on the Daily High Low Charts.

For today, expect the Markets to open on a mildly positive note again and look for directions. The intraday trajectory would be important as it was in last couple of sessions to determine the trend as the Markets have been under serious consolidation, even while being in “overbought” range as evident on the above charts. The volumes too would be critical as they have been hovering around its average and have not been extraordinary at all.

For today, the levels of 5428 and 5460 shall act as resistance and the supports comes as low as 5355 and 5290 levels. The liquidity has been chasing the Markets though volumes have hovered around its average. The RSI—Relative Strength Index on the Daily Chart is 73.2444 and continues to remain in “Overbought” range. The NIFTY has made a new 14-day high but the RSI has not and this is “Bearish Divergence” on the Daily Charts. The Daily MACD continues to trade above its signal line.

Yesterday’s spurt in the last hour of the trade has come with shedding in Open Interest in NIFTY futures. The Markets have seen a multiple tops around 5430 levels and it has been severely consolidating since last couple of days. At the same time, it would be important to note that it remains “overbought” and the lead indicator shows a bearish divergence and shedding in Open Interest. So, in other words, even with positive opening and with the liquidity continue to chase the Markets and even if gives breakout on the up side after this consolidation, it would continue to remain at dangerous levels and the sustainability of such up move would be in question.

Given this reading, we continue to reiterate our stand of high degree of caution in the Markets. We have been repeating this often in our previous editions of Daily Market Trend Guide and continue to do this in today’s edition as well. It is advised to refrain from taking any aggressive position, especially on the long side and is it advised to remain ultra selective and stock specific in approach. Overall, cautious approach is advised for today.

Milan Vaishnav,

Consulting Technical Analyst,

www.MyMoneyPlant.co.in

http://milan-vaishnav.blogspot.com

+91-98250-16331

milanvaishnav@mymoneyplant.co.in

milanvaishnav@yahoo.com

Monday, February 13, 2012

Daily Market Trend Guide -- Monday, February 13, 2012

MARKET TREND FOR TODAY February 13, 2012

The Markets on Friday showed some further signs of correction as it ended the day with modest losses after spending the brief morning session into the green. The Markets opened into positive and gave its intraday high of 5427.75 as it traded positive in capped range in the morning trade. The Markets thereafter transformed into negative falling trajectory. In the early afternoon trade, it not only dipped into the red, but went on to give its intraday low of 5341.05, coming off 80-odd points from its day’s high. It saw some recovery towards the end but still ended the day at 5381.60, posting a modest loss of 30.75 points or 0.57%. With this, the Markets has continued to form a Parallel Bar once again on the Daily High Low charts and has ended the Week with net gains of 55.75 points or 1.05%.

For today, expect the Markets to open on a flat note and look for directions and today, the intraday trajectory would determine if the Markets are to consolidate in a range or continue with the correction. The Markets have formed a Parallel Bar on the Daily High Low Charts but with the difference that it has ended the day on the lower side and theoretically speaking, this shows likelihood of continuation of correction.

The levels / range of 5400-5430 have become immediate top for the Markets and no sustainable up move will occur until we move past those levels. For today, the levels of 5400 and 5430 shall act as resistance and the levels of 5310 and 5275 shall act as supports.

The RSI—Relative Strength Index on the Daily Chart is 71.5846 and it is neutral as it shows no negative divergence or failure swings. However, it continues to remain in “overbought” range. The Daily MACD continues to trade above its signal line.

On the Weekly Charts, the RSI is 57.8331 and it has reached its highest value in last 14-weeks. On the Candles, A doji star occurred (where a doji gaps above or below the previous candle). This often signals a reversal with confirmation occurring on the next bar.

The NIFTY February Futures have declined more (49 points as against 30 Points Nifty) and has also shown a decline in Open Interest which shows some unwinding in February Futures. Overall Open Interest has increased and this signifies the possibility of profit taking in February futures and overall short creation in next month’s futures. The NIFTY also has a pattern resistance at 5400-5410 levels on Weekly Charts too.

All and all, no sustainable up move is expected until the Markets moves past 5400-5430 levels and that too with its lead indicators in place and not with them in “overbought” range. Until this happens, it shall either trade in range, or might continue with correction which is now imminent and overdue. We continue to reiterate our stand of exercising high degree of caution and any long positions should remain highly stock specific and selective. Overall, cautious outlook is advised for the day.