Gemstone Equity Research & Advisory Services

Friday, February 24, 2017

Daily Market Trend Guide -- Monday, February 20, 2017

MARKET TREND FOR MONDAY, FEBRUARY 20, 2017

The benchmark NIFTY50 on Friday saw a gap up opening but settled with net gains of 43.70 points or 0.50% after coming off from the opening highs. Today, we expect a directionless opening to the Markets in the initial trade. The NIFTY has placed itself at a very critically important juncture. On one hand, it has attempted an upward breakout after nearly seven days of consolidation and on the other end; it has closed very near to the critical resistance area of 8820-8830 levels. The opening levels, therefore, will be greatly important and if the NIFTY manages to trade above these 8820 — 8830 zones, it will trade with an upward bias though the intraday trajectory will remain crucial. If the NIFTY trades below 8820-8830 levels, it will push itself again into short term consolidation. The behavior of the NIFTY vis-à-vis the 8820-8830 zone, therefore, will remain very crucial to watch for.

For today, the levels of 8830 and 8905 will act as immediate resistance levels for the Markets. The supports will come in at 8765 and 8690 levels.

The Relative Strength Index – RSI on the Daily Chart is 68.8852 and it does not show any failure swings. The NIFTY has formed a fresh 14-period high while the RSI has not and this has resulted into Bearish Divergence. The Daily MACD remains bearish while trading below its signal line. On Candles, a rising window has occurred. Though this is a gap up bar and indicates bullish continuation, but this formation if read in the current context may push the Markets into some consolidation for very short time.

On the derivative front, the NIFTY February series has shed over 3.66 lakh shares or 1.49%. This indicates that some profit taking has taken place post gap up opening in the previous session.

Coming to pattern analysis, the NIFTY has poised itself at a critical juncture. Post consolidation that lasted nearly seven sessions, the NIFTY saw a gap up opening which could have otherwise led to a positive breakout on the Daily Charts. However, the opening levels in the previous session coincided with the major area resistance levels on the NIFTY’s Weekly Chart and the Markets saw some profit taking at higher levels. With the NIFTY ending very near to its congestion zone resistance of 8820—8830, if the NIFTY trades below this level then some consolidation for some short time cannot be ruled out.

All and all, even with the likelihood of the NIFTY consolidating for some more time if it trades below 8820-8830 zones, the undercurrent remains strong and the overall trend remains intact. We still continue to advice to keep overall exposure limited and light but selective purchases may be continued to be made. Any major short selling should be avoided as there are no signs of the NIFTY marking any immediate top. Overall, positive caution 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

Sunday, February 19, 2017

WEEKLY MARKET OUTLOOK FOR FEBRUARY 20 THRU FEBRUARY 23, 2017

WEEKLY MARKET OUTLOOK FOR FEBRUARY 20 THRU FEBRUARY 23, 2017

The Week ending on Friday remained quite eventful as the benchmark NIFTY50 saw good amount of volatile swings during the Week but ended flat with nominal gains of 28.15 points or 0.32% on Weekly basis. We had mentioned in our two previous Weekly notes about possibility of NIFTY testing the 8900-mark. This week, with the Weekly high of 8896.45, NIFTY just fell short of this level. In the coming Week, we see some signs of exhaustion on the Weekly Charts. We might see some up ticks in the coming trading days but some consolidation from higher levels cannot be ruled out. The coming Week being expiry week and also a short one with Friday being a trading holiday is likely to prevent the Markets from posting any runaway rise. However, the undercurrent remains very much in tact and we certainly expect the benchmark to test the 8900-8950 zones as it approaches its Double Top resistance zone.

In the coming week, the levels of 8900 and 8975 will pose stiff resistance to the Markets. The supports come in quite lower at 8765 and 8680 levels.

The Relative Strength Index – RSI on the Weekly Charts is 63.1843 and it has reached its highest value in last 14-period which is Bullish. The Weekly MACD remains bullish while it continues to trade above its signal line. On Candle, a Doji Star has occurred. If we read this formation in the present context and the structure of the Chart, though it may not signal a reversal but is likely to push the Markets in some more consolidation. However, this will require confirmation on the next bar.

The pattern analysis show the Markets clearly approaching it Double Top formation and approaching its most recent highs formed in the last quarter of the year 2016. If we take a broader look, NIFTY is in fact forming a TRIPLE TOP formation. This formation is valid if we also take in to account the top formed early 2015 which is slightly away. Further important indication of a buoyant undercurrent is that the third top is formed with a significantly higher bottom by NIFTY. Therefore, while the NIFTY adjusts itself and deliberates a bit in form of a range bound consolidation, overall trend remains intact from all possible angles.

Overall, though we certainly expect the coming week to be volatile, we do not see any significant corrective activity coming place. The way the Charts show possible broad ranged consolidation, it also indicates some more underlying steam left in the Markets. We advice to keep the overall positions very light given the expiry week and the long week-end, we reiterate to use the consolidation time in making select quality purchases. However, given the present scenario, some evident sector rotation will hold the key in successful stock selection. Cautious approach is advised for the coming week.

A study of Relative Rotation Graphs – RRG clearly show that the IT Stocks, though after putting up stunning and resilient performance over previous week, will continue to lose momentum. Individual performance will dominate but the momentum is likely to remain less as compared to Markets in general. The REALTY pack will continue to improve its relative outperformance and this is also likely to induce relative outperformance in housing finance companies as well, though on very selective note. SMALL CAP universe will show further gain in momentum. INFRA stocks will also lead the up move, if any and will remain resilient to the corrective downsides, if any. We will see some distinct outperformance from select FMCG Stocks as well. While METAL and ENERGY pack will continue to weaken on week on week basis, we might see some consolidation from the PSUBANK stocks. While PHARMA is likely to lag as a sector, select performance from participants of MIDCAP and NIFTYJR pack cannot be ruled out.

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)