Gemstone Equity Research & Advisory Services

Friday, November 4, 2016

Daily Market Trend Guide -- Friday, November 04, 2016

MARKET TREND FOR FRIDAY, NOVEMBER 04, 2016

The Markets had a lackluster session as it gave up in the last hour of the trade to end the day with minor losses. Today as well, the NIFTY continues to hang in precarious balance. Yesterday, the NIFTY ended up taking support at the lower line (return line) of the falling channel that it has formed. Having said this, today, we can expect a lower opening and this is all likely to cause the NIFTY to open outside the falling channel raising possibilities of a downward break down. However, it would be important to see if the NIFTY improves as the day progresses and comes back inside the trading range of the falling channel.

For today, the levels of 8520 and 8555 will act as immediate resistance levels for the day. The supports come in at 8450 and 8420 levels on the downside.

The RSI—Relative Strength Index on the Daily Chart is 35.4053 and it has reached its lowest value in last 14-days which is bearish. It does not show any bullish or bearish divergence. The Daily MACD remains bearish as it trades below its signal line.

On the derivative front, the NIFTY November futures have shed yet another over 1.72 lakh shares or 1% in Open Interest. The NIFTY PCR stands at 0.93 as against 0.95.

Coming to pattern analysis, the NIFTY has taken support as of now on the lower line (return line) of the falling channel that it has formed from 8968 levels. Any breach of this return line will cause the NIFTY to get weaker in the near term. Today’s likely lower opening will see the Markets opening outside this falling channel and this obviously is a reason to worry for the Markets. It would be critically important to see if there is some improvement as the day progresses in the second half of the session and the NIFTY crawls back into the trading range.

All and all, we sound high levels of caution in the Markets today. It is advised to refrain from taking any fresh positions at any side and maintain liquidity to hold and protect existing positions. At any levels, wherever possible, exposures should be curtailed. The reaction to the European Markets too will be important to watch in the second half. The NIFTY will also react to the GST rates that got finalized yesterday. Overall, very cautious outlook is advised on the Markets 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

Association of Technical Market Analysts, (ATMA), INDIA

www.EquityResearch.asia

http://milan-vaishnav.blogspot.com

+91-98250-16331

milan.vaishnav@equityresearch.asia

milanvaishnav@yahoo.com

Thursday, November 3, 2016

Daily Market Trend Guide -- Thursday, November 03, 2016

MARKET TREND FOR THURSDAY, NOVEMBER 03, 2016

After a gap down opening yesterday, the NIFTY ended the day with a deep cut and showed no signs of recovery during the day while it moved in a 35-odd points range in sideways trajectory. Today, we can expect a subdued opening in the Markets but at the same time, we can expect some attempts by the Markets to find some stability as it rests at a important short term pattern support. However, it rules below the 100-DMA levels and therefore the level of 8567 will remain critically important to watch out for.

For today, the levels of 8567 and 8620 will act as important resistance while the supports come in at 8485 and 8450 levels.

The RSI—Relative Strength Index on the Daily Chart is 37.2195 and it does not show any failure swings. The NIFTY has formed a fresh 14-period low but RSI has not and this shows Bullish Divergence. The Daily MACD stays bearish as it trades below its signal line. A falling Window occurred on Candles. This is a gap and this can have bearish implications. However this needs confirmation.

On the derivative front, the NIFTY November futures have 1.54 lakh shares or 0.89% in Open Interest. This figure is not significantly higher and there has been no large scale offloading / unwinding that was visible in the Markets yesterday.

Coming to pattern analysis, the NIFTY continues to remain in a falling channel formation drawn from 8968 levels. Yesterday, it opened, remained and closed below 100-DMA level which is 8567 today. It is important to note that the NIFTY currently stays within the filter of this 100-DMA and also rests at important short term pattern support. This shows that there are some chances that the NIFTY attempts to find some base and stabilize at current levels. However, to do it, it is critically important for the NIFTY to pullback and trade above 100-DMA levels to avoid further weakness.

All and all, NIFTY is currently not at all out of woods as yet and so long as it rules below 100-DMA levels, it will continue to remain vulnerable sell-offs and volatile movements. In the current scenario, we maintain our view to approach Markets with elevated levels of caution. Shorts should be avoided and downsides should be utilized to make very selective purchases. We will see sectoral out performance from IT and select MidCap stocks. While remaining relatively light on overall exposures, cautious optimism is advised for the day.