Daily Market Trend Guide -- Wednesday, August 26, 2015

MARKET REPORT                                                                                     August 26, 2015

The Markets continued to taste its dosage of volatility as it failed to capitalize on its opening gains, dipped to a fresh low and then recovered to end the day with gains. The Markets saw a expected but modest gap up opening and after opening strong in the initial trade and formed its intraday high of 7925.40 in the early minutes of the trade. However, post this strong opening, the Markets pared all of its 100+points of gains by late afternoon trade and traded flat. The weakness intensified in the early afternoon trade as the Markets slumped to a fresh low of 7667.25, by afternoon, coming off nearly 258-odd points from its opening highs. However, the second half of the session saw the Markets recovering once again from the low point. It not only recouped all of its losses but went on to trade in the positive. After witnessing nearly 375-odd points of volatility, the Markets finally ended the day at 7880.70, posting a net gain of 71.70 points or 0.92% while forming a lower top and lower bottom on the Daily Bar Charts.

MARKET TREND FOR WEDNESDAY, AUGUST 26, 2015

Markets saw a heavy short covering and some buying led recovery yesterday. Today, we are again set to see a gap down opening but on the similar lines, it would not be surprising if the Markets see recovery as we go ahead in the session. Volatility is going to remain ingrained in the Markets for quite some time now and today as well, we will continue to see volatility in the session at every level as the even without any gap down, the Markets still continues to remain “oversold”.

For today, the levels of 7925 and 7980 will act as immediate resistance for the Markets. The supports come in at 7780 and 7710 levels.

The RSI—Relative Strength Index on the Daily Chart is 28.8851 and it remains neutral as it shows no bullish or bearish divergence or any failure swings. Daily RSI still trades in “oversold” territory. The Daily MACD continues to remain bearish as it trades below its signal line. On the Candles, a long lower shadow has occurred. This is typically a bullish signal, as in case of NIFTY, as it has occurred near a low price level when the NIFTY has been in “oversold” territory.

On the derivative front, NIFTY August futures have shed over 27.59 lakh shares or 17.04% in Open Interest. The September series have added over 44.26 lakh shares or 56.03% in Open Interest. The silver lining is that the NIFTY has witnessed a net addition of 16.50 lakh shares in Open Interest. The NIFTY PCR stands at 0.78 as against 0.76 yesterday.

Coming to pattern analysis, as mentioned in our yesterday’s edition of Daily Market Trend Guide that the Markets have breached its Head and Shoulder formation neckline. However, at the same time, while breaking down on the downside, the Markets have declined much more than its usual measuring implication arising out of such formations. Further, the Markets have been in oversold territory and after yesterdays up move, it has remained in oversold territory. With today’s gap down opening expected again, the session is likely to remain heavily volatile but downsides are not likely to sustain at Close levels due to the oversold nature of the Markets.

All and all, we continue to reiterate our advice to keep away from any major exposures in the Markets. Further shorts should be strictly avoided and the Markets are set to see sharp short covering at any given time and this remains imminent. While maintaining liquidity, highly cautious approach should be adopted for today.

Milan Vaishnav,
Consulting Technical Analyst

Af. Member: Market Technicians Association, (MTA), USA
Af. Member: Association of Technical Market Analysts, (ATMA), INDIA
www.EquityResearch.asia
http://milan-vaishnav.blogspot.com

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