MARKET REPORT June
04, 2014
The Markets continued to brush aside the technicals and
continued to surge upwards on continued heavy short covering as it ended the
day on fresh highs while continuing to shed Open Interest. The Markets opened
expectedly on a quiet note and after trading briefly into green with limited
gains in the morning trade dipped into negative while it formed its day’s low
of 7342.15. However, the Markets changed its trajectory soon after that and
started seeing some strength coming in as it not only went back in to the green
but also went on to form day’s high of 7424.95. The Markets saw some sudden
paring of gains at these levels but it recovered again to finally end the day
at 7415.85, posting a net gain of 53.35 points or 0.72% while forming a higher
top and higher bottom on the Daily High Low Charts.
MARKET TREND FOR TODAY
Today’s analysis remains more or less on similar lines that
of yesterday. The Markets are likely to open on a flat and quiet note and look
for directions. Even if its continues to show some strength, they are now
trading “overbought” and there are all chances that the Markets show some
corrective actions which are now overdue and imminent given the technicals,
pattern analysis and the F&O data as well.
For today, the levels of 7445 and 7470 would act as
immediate resistance levels for the Markets. The supports exist much lower at
7340 and 7270 levels.
The lead indicators too continue to show weariness and bias
towards impending correction in the Markets. The RSI—Relative Strength Index on
the Daily Chart is 73.5097 and it does not show any failure swings. However,
the NIFTY has formed a new 14-day high whereas the R SI has not and this is a
very clear Bearish Divergence. Further, the RSI now trades in “Overbought”
territory. The Daily MACD continues to remain bearish even after two days of
robust gains as it trades below its signal line and is bearish.
On the derivative front, NIFTY June futures have shed over
6.54 lakh shares or 3.96% in Open Interest. This very clearly indicates that
unwinding of existing positions is done and the rise that we saw yesterday has
been clearly on back of heavy short covering.
Going by the pattern analysis, the Markets have attempted to
move past the Double Top Formation of 7381
at Close levels. Though it has moved past this double top at Close levels, they
trade much below the Double Top formation on Daily High Low Bar Charts. To add
to this, they have now entered the “overbought” condition with continuous reduction
of Open Interest in last two days. This
translates into conclusion that the Markets shall not achieve a clear cut
straight forwards breakout but would continue to either consolidate OR correct
from these levels.
All and all, while continuing on yesterday’s lines, we
continue to reiterate to refrain from creating over exposures in the Markets.
Fresh purchases should be done on extremely selective basis and should remain
highly stock specific and defensive. Over, while maintaining liquidity,
continuance of cautious approach is advised for today.
Milan Vaishnav,
Consulting Technical Analyst,
+91-98250-16331
