Gemstone Equity Research & Advisory Services

Wednesday, February 8, 2017

Daily Market Trend Guide -- Wednesday, February 08, 2017

MARKET TREND FOR WEDNESDAY, FEBRUARY 08, 2017

Though with less intensity, first signs of some overdue correction in the Indian Equities became evident as the benchmark NIFTY50 ended the day with modest losses of 32.75 points or 0.37%. Today, we expect a subdued opening in the Markets and the analysis remain more or less on similar lines as we expect some corrective activities to continue. Markets will also react to the RBI Credit Policy Review which comes up later as we go ahead in the session. Rate cut of 25 bps is expected but overall this is likely to remain a non-event. Bank stocks anyway are trading extremely overbought and may find any reason for impending corrective activities. For immediate short term, 8820 has now become a important resistance to watch out for.

For today, the levels of 8820 and 8865 will act as immediate resistance levels. The supports will come in lower at 8720 and 8675 levels.

The RSI—Relative Strength Index on the Daily Chart is 71.5979 and it is neutral as it shows no bullish or bearish divergence or any failure swings. However, it still continues to trade in “overbought” territory. The Daily MACD remains bullish trading above its signal line but has started to flatten its trajectory. On the Candles, an Engulfing Bearish Line has occurred. This is significant because it has formed during an up move and it markets a potential halt in the current up move. It is an indication that the momentum has started to shift to bearish hands.

The NIFTY February futures saw shedding of over 2.85 lakh shares or 1.31% in Open Interest. This shows minor profit taking from higher levels.

While having a look at pattern analysis, the NIFTY50 is very near to its major pattern resistance levels. Though these levels fall ahead of the current closing level, the overbought nature of the Markets is causing impediments for upward moves. The lead indicators have been overstretched over past couple of days and this makes the immediate structure of the Markets slightly dangerous and unhealthy. Though there are no signs of reversal of trend at current levels, some amount of correction from the current levels cannot be ruled out.

All and all, it is important to note that corrections within an uptrend are healthy phenomenon and often prepares Markets for further up moves. Minor corrective activities are likely to continue but NIFTY may still proceed to test its logical targets of 8850-8900 mark in coming days. But currently, given the overbought nature of the Markets, some correction will be imminent and continues to remain overdue. We continue to reiterate adopting highly cautious approach to the Markets and vigilantly protect positions at higher levels.

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

Tuesday, February 7, 2017

Daily Market Trend Guide -- Tuesday, February 07, 2017

MARKET TREND FOR TUESDAY, FEBRUARY 07, 2017

The benchmark NIFTY50 had a better than expected session as it continued to over-stretch itself while being in overbought territory as it ended yet another day with gains ending 60.10 points or 0.69% higher. At this juncture, we very explicitly raise a word of caution. We do not dispute the underlying buoyancy in the Markets but in the same breath, the way the NIFTY is overbought and the manner in which the lead indicators are overstretched, some corrective activity from higher levels is very much long overdue. While raising the cautious undertone, we explicitly point out not to ecstatically chase the rally as this is now getting bit unhealthy. Some corrective action, in form of some consolidation would be in fact healthy for the Markets to help it move higher than current levels.

The levels of 8830 and 8865 will pose resistance to the Markets and the supports will exist much lower at 8735 and 8660 levels.

The RSI—Relative Strength Index on the Daily Chart is 75.1939 and it has posted a fresh 14-period high which is bullish. However, we cannot ignore the fact that it is trading highly overbought. The Daily MACD continues to trade above its signal line. On Candles, a rising window (gap) has occurred. Though it is a bullish undertone, the overbought nature of the Markets cannot be ignored and we have to approach this formation with great amount of caution.

The NIFTY February futures have added over 3.68 lakh shares or 1.71% in Open Interest which implies continuing buoyancy in the Markets.

While coming to pattern analysis, the way the buoyant undertone is evident, we cannot discount the fact that the NIFTY is trading highly overbought. The lead indicators are evidently overstretched and therefore it is clear that such ecstatic chase of the up move can be turn dangerous as the corrective activities too tend to be equally sharp. While we accept and acknowledge the fact that the overall trend remains unanimously on the upside, some short term correction is long overdue and it would be required to make the Markets healthy. The Bollinger Bands are nearly 46% wider than normal indicating high prevailing volatility. It also increases the chances of the NIFTY returning in a consolidation range.

Overall, we now strongly advise to approach the Markets with highly levels of caution. We strongly recommend refraining from creating any fresh long positions and protect profits wherever applicable. The unabated rise while remaining overbought can become unhealthy and can induce short term but sharp corrective actions. Remaining light on positions or reducing positions with each higher levels and adopting cautious outlook is advised for today.