Daily Market Trend Guide -- Tuesday, January 19, 2016

MARKET REPORT                                                                                         January 19, 2016

Markets remained thoroughly bearish and went on to post fresh 52-week lows while it ended yet another day with losses. The Markets saw a stable opening on expected lines and traded briefly into positive territory while it formed its intraday high of 7463.65. However, after trading briefly into positive in much capped range, the Markets slipped into the red. However, it continued to trade once again in sideways trajectory for most part of the afternoon trade. It headed nowhere until second half of the session. However, the second half saw some weakness creeping in again and that too in intensified manner. The Markets rapidly lost ground and slipped to form the day’s low of 7336.40, coming off nearly 130-odd points from the high point of the day. It finally settled the day at 7351, posting a net loss of 86.80 points or 1.17% while forming a lower top and lower bottom on the Daily Bar Charts.

MARKET TREND FOR TUESDAY, JANUARY 19, 2016

Broader markets are now cleanly oversold and we can now expect some stability to return in the Markets.  The Markets are expected to open on a flat to mildly positive note and look for directions. It is expected and it is equally important that the Markets maintains and builds up on its expected mildly positive opening. NIFTY and other broader and sectoral indices are now seriously oversold and irrespective of the quantum, some amount of technical pullback remains imminent.

For today, the levels of 7415 and 7475 are immediate resistance levels for the Markets. The supports come in at 7330 and 7275 levels.

The RSI—Relative Strength Index on the Daily Chart is 28.2698 and it has reached its lowest levels in last 14-days which is bearish. However, it does not show any bullish or bearish divergence and it now trades in “oversold” territory. The Daily MACD remains bearish as it trades below its signal line.

On the derivative front, the NIFTY January futures have shed over 13.78 lakh shares or 6.09% in Open Interest. The NIFTY PCR stands at 0.80 as against 0.82.

While taking a look at pattern analysis, the Markets have breached its critical support levels of 7540 which were its previous 52-week lows and have since then remained weak on expected lines. Post breaching these levels, the Markets have lost over 200-odd points from those levels and now trades grossly “oversold”. The lead indicators clearly suggest themselves trading in oversold territory. Having said this, with the  NIFTY and other broader and secotoral indices trading in seriously oversold territory, some amount of pullback cannot be ruled out. In fact, some amount of technical pullback now remains imminent. However, on its way up, the significant levels like 7540 that the Markets have breached on the downside will pose resistance to it as well. Any amount of pullbacks that are seen now will remain “pullbacks” and will not amount to trend reversal in near term.

All and all, though the structure of the Markets remain evidently bearish in the immediate medium term, it is likely to show some stability and attempt some pullback. It is advised to completely refrain from creating fresh shorts. In fact with any weakness some very selective purchases can be made but at the same time profits at higher levels should be protected. Investors can now start creating long exposures in smaller quantities on highly selective basis.

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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