Friday, September 26, 2014

Daily Market Trend Guide -- Friday, September 26, 2014

MARKET REPORT                                                                            September 25, 2014
The Markets took a beating yesterday as it registered a significant decline on a very high volume on the expiry day of September series as it ended the day with a deep cut. Coal verdict and resultant negative sentiments were to blame but technicals too remained much weaker as well. The Markets opened on a flat note and formed its intraday high of 8019.30 in the early minutes of the trade. Thereafter, for the rest of the session, the Markets remained in falling channel and in falling trajectory. In the morning trade itself, it slipped in the red and kept losing ground consistently. It kept making lower lows intraday and continued to see selling pressure throughout the session. This pressure intensified in the late afternoon trade as the Markets nearly touched its 50-DMA while it formed the day’s low of 7877.35, slipping nearly 140-points off its intraday high. Minor attempt to recover was made in last minutes of the trade but the Markets finally settled at 7911.85, posting a net loss of 90.55 points or 1.13% while forming a lower top and sharply lower bottom on the Daily Bar Charts.


MARKET TREND FOR FRIDAY, SEPTEMBER 26, 2014

Technically speaking, the weakness in the Markets is likely to persist, at least in the initial trade. Expect the Markets to open on a lower note and look for directions. The Markets are expected to test its 50-DMA of 7876 and the behaviour of the Markets vis-à-vis this level would be crucially important. Any breach below this would put the Markets in intermediate downtrend. Markets will have to trade above this level to see a pullback, even if it is merely a technical pullback.

The levels of 7950, 7975 would act as immediate resistance while the levels of 7876 and 7810 would act as immediate supports.

The RSI—Relative Strength Index on the Daily Chart is 44.3611 and it has reached its lowest value in last 14-days which is bearish. However, it does not show any bullish or bearish divergence. The Daily MACD continues to remain bearish while trading below its signal line. 

On the derivative front, the October Series has seen NIFTY Futures adding over 34.28 lakh shares or 27.76% in Open Interest. However, this being also due to rollovers, the singular reading of this data may not be of much significance. However, with the overall premium in the NIFTY Futures declining, we have grounds to presume that some creation of short positions too have taken place.

Returning to pattern analysis, in our previous editions of Daily Market Trend Guide, we have been mentioning the Broadening Formation on the Daily Charts. This formation has kept its significance as the Markets have now confirmed the levels of 8180 as its immediate top. Now, it would be necessary for the Markets to either consolidate or correct and form a different area pattern before it attempts to move up again. The sustenance of the Markets above its 50-DMA would be crucial in order to avoid entering into intermediate downtrend.

Given this reading, the Markets are set for a lower opening but there are mild chances that the Markets may put up some resilience post opening while attempting to take support near 50-DMA. Bargain hunting may be done, but only in select stocks while still keeping overall leverage under control and maintaining adequate liquidity. Apart from mild bargain hunting, purchases should be avoided while maintaining heavy caution in the Markets.

Milan Vaishnav,
Consulting Technical Analyst,
Af. Member: Market Technicians Association (MTA), USA
Af. Member:
Association of Technical Market Analysts, INDIA

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