Gemstone Equity Research & Advisory Services

Monday, May 7, 2018

MARKET OUTLOOK FOR MONDAY,MAY 07, 2018

MARKET OUTLOOK FOR MONDAY,MAY 07, 2018

Friday’s session saw the corrective action getting extended as the Markets continued with its modest slide. The benchmark Index NIFTY50 continued to retrace and ended the day with a loss of 61.40 or 0.57%. The session remained relatively less volatile and therefore did not see VIX rising too much. The session also confined itself to a narrow trading range all throughout the day.

As we approach a fresh week, stable global environment may see Indian Markets opening on a relatively stable and modestly positive mode. We may also see some technical pullback but speaking on broad terms, we will continue to see consolidation persisting in the Markets with the previous Week’s high acting as major resistance.

Monday’s trade is likely to see the levels of 10650 and 10695 acting as resistance. Supports are likely to come in at 10575 and 10540.

The Relative Strength Index – RSI on the Daily Chart is 57.8654 and it has marked a fresh 14-period low which is bearish. RSI has marked a fresh 14-period low while NIFTY has not done so. This also marks a Bearish Divergence against the price. Daily MACD still continue to trade above its signal line. No significant formations were seen on Candles.

Pattern analysis shows that after breaking out from the rectangle formation and testing immediate highs of 10785, the NIFTY has been giving a throwback. It continues to remain in this formation until it forms a higher bottom and attempts to move higher again.

Overall, though a positive and stable start is expected on Monday, we will continue to see consolidation persisting at higher levels. The Markets still continue to remain vulnerable to profit taking bouts at higher levels unless the levels of 10785 are breached on the upside. The VIX continue to remain at low levels and this keeps room for volatility to increase in the near term. Though there are no signs as yet that point towards any major downsides. While continuing to avoid shorts, any corrective moves from higher levels should be used to make fresh purchases. Highly stock specific approach with cautious view on the Markets is advised for the day.

STOCKS TO WATCH:

Relatively better technical setup is observed in stocks like TATA SPONGE, FUTURE LIFESTYLE, GAIL, BOSCH, TV18 BROADCAST, INDIGO, LT FOODS, SRS LIMITED, JMT AUTO and IVRCL.

(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 known as Market Technicians Association, (MTA), USA
Canadian Society of Technical Analysts, (CSTA), CANADA
Society of Technical Analysts (STA), UK
www.EquityResearch.asia
http://milan-vaishnav.blogspot.com

+91- 70164-32277 / +91-98250-16331
milan.vaishnav@equityresearch.asia
milanvaishnav@yahoo.com

Saturday, May 5, 2018

WEEKLY MARKET OUTLOOK FOR MAY 07 THRU MAY 11, 2018

WEEKLY MARKET OUTLOOK FOR MAY 07 THRU MAY 11, 2018

Much on the expected lines and after five weeks of a significant pullback, the Markets chose to take a breather in the week that went by. The benchmark NIFTY50 stalled its up move, moved in a range and ended the week with a net loss of 74.05 points or 0.69%. The level of 10790 was mentioned in our previous weekly note as a potential resistance levels and the previous week’s high stood at 10784 with the NIFTY resisting precisely in the mentioned zone.

As we approach the coming week, we expect the Markets to continue to consolidation. The relatively low levels VIX in recent times has made some room for volatility returning and persisting in the Markets in the immediate near term.

Just like it happened in the previous week, we expect the level of 10790 acting as immediate resistance levels for the Markets along with 10890. Supports are expected to come in at 10550 and 10430 zones.

The Relative Strength Index – RSI on the Weekly Charts is 57.6791. RSI remains neutral to the price showing no divergence. The Weekly MACD still remains bearish as it trades below its signal line. However it is seen steeply moving towards positive crossover. If the coming week does not see any major declines, we may see this indicator turning bullish as well. No significant formations were observed on Candles.

Pattern analysis of the Weekly Charts shows the 27-month long upward rising channel intact. However, a potential lower-top in the form of the 10784-mark is seen being formed. In other words, this area is a important resistance in the immediate near term for the Markets.

Overall, the structure of the Charts and the indicators point towards two distinct possibilities. First, it is very much likely that the NIFTY will continue to witness some more consolidation and we will also see some volatility creeping in as well along with this. Secondly, it is equally likely that despite near-certainty of the consolidation or mild corrective moves spilling over to the coming week, we will see resilience from the Markets and downsides, if any, will remain limited. However, fresh up move shall occur only after the levels of 10785 are breached on the upside. Effective rotation of sectors and selective approach towards stocks will remain indispensible in the coming week.

A study of Relative Rotation Graphs – show that IT Pack is evidently seen losing momentum and might enter a longer consolidation phase. We will see relative outperformance from the FMCG pack along with services sector components. We will also see betterment of relative performance from the AUTO, Financial Services, NIFTY MID50, NIFTY NEXT50 and broader Indices like CNX100 and CNX200 as they are all seen entering the Improving Quadrant while bettering their relative momentum. We will also see sectors like PHARMA, PSUBANKS, BANKNIFTY, SMALL CAPS, INFRA and MEDIA consolidating and contributing through stock specific out performances. All this is cumulatively likely to keep Markets resilient to downsides. Apart from this, no noticeable show is expected from Metals, REALTY, ENERGY, Public Sector Enterprises apart from attempts to consolidate.

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.