Daily Market Trend Guide -- Thursday, September 10, 2015

MARKET REPORT                                                                                    September 10, 2015

The Markets continue with its short covering much on expected lines as it ended the second day with gains after opening on a positive note. The Markets saw a near gap up opening fuelled by strong technical possibilities aided by positive global cues. The Markets opened positive and after trading with capped gains in the morning trade, strengthened further to touch the day’s high of 7846.05. Markets maintained these levels in the afternoon trade but in the second half of the session came off from these highs and pared much of its gains. However, the last hour of the trade saw Markets making up moves again and the Markets finally settled the day at 7818.60, posting a net gain of 130.35 points or 1.70% while forming a higher top and higher bottom on the Daily Bar Charts.

MARKET TREND FOR THURSDAY SEPTEMBER 10, 2015

We had categorically mentioned that the Markets remains exposed to vulnerability of retracements again at higher levels. Keeping in line with this analysis, the Markets are once again set to open on a negative note and trade  gap down in the initial trade. The reason being, the rise that we saw in the last two sessions have purely been on account of short covering and may well established itself as what is known in technical parlance – a dead cat bounce. It would be extremely important to see if the Markets attempt to recover post opening but the bias continues to remain towards sustained weakness.

The levels of 7845 and 7870 will act as immediate resistance levels for today. The supports come in at 7750 and 7675 levels.

The RSI—Relative Strength Index on the Daily Chart is 41.7319 and it has reached its highest value in last 14-days which is bullish. Also, the RSI has set a fresh 14-period high whereas the NIFTY has not and this is bullish divergence. The Daily MACD remains bearish as it continues to trade below its signal line.

On the derivative front, the NIFTY September futures have shed over 14.91 lakh shares or 6.28% in Open Interest. This very clearly, and in no unclear terms, indicates heavy short covering in the Markets. The NIFTY PCR stands at 0.94 as against 0.95.

Coming to pattern analysis, the Markets have pulled back nearly 300-odd points from the lows it formed on 7^th September. However, post breaking down from the bearish Head and Shoulder formation and further breaking down from its key support zone of 7960-8000 levels, what Markets have shown is just a “technical pullback”. At least this is what it appears. Further to this, if the Markets opens lower as expected and makes no attempt to recover, it would prove that what we saw in last two sessions is merely a dead cat bounce.  It is important to also note that the Markets created a “gap” yesterday, by opening gap up, and ending higher. However, this gap has been created within a formation. They are known as “area gaps” and have least significance and tend to get filled up very easily.

Keeping the overall technical picture in view, the Markets are slated to open lower and most probably are all likely to continue to trade weak. The key would be to see if the Markets recover as we go ahead in the session but the bias remains on the weaker side. Any pullbacks that we now see should be used to make exists as we continue to remain vulnerable to sell-offs at higher levels. Very cautious outlook is advised for the day.

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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