Daily Market Trend Guide -- Tuesday, February 09, 2016

MARKET REPORT                                                                                    February 09, 2016

After heading nowhere for the most part of the session, the Markets suffered a late afternoon drag as it very rapidly pared grounds tracking global weakness and ended the day with a cut. The Markets saw a very quiet opening and after trading briefly into the red, it crawled back to trade modestly into positive territory. The Markets formed its intraday high of 7512.55 in the morning trade but headed nearly nowhere. It spent most part of the trading session in very capped and sideways trajectory. It was the last hour and half of trade that spelled panic of the Markets. Tracking global weakness, the Markets once again went down in near-vertical manner to form the day’s low of 7363.20, coming off nearly 150-odd points from the high point of the day. It finally settled the day at 7387.25, posting a net loss of 101.85 points or 1.36% while forming a slightly higher top but lower bottom on the Daily Bar Charts.

MARKET TREND FOR TUESDAY, FEBRUARY 09, 2016

The Markets once again reacted from the 7500-7520 levels yesterday and saw a sharp paring of gains from higher levels. Today as well, we can fairly expect the Markets to open on a modestly weaker note and look for directions. It would be critical to see the intraday trajectory that the Markets form post opening as it would decide if the Markets are holding on to the short term trend line that it has been taking support on. If the Markets breach this, then some more short term weakness cannot be ruled out.

For today, the levels of 7430 and 7490 are expected to act as immediate resistance levels for the Markets. The support come in a 7360 an 7310 levels.

The RSI—Relative Strength Index on the Daily Chart is 42.2520 and it remains neutral as it shows no bullish or bearish divergence or any failure swings. The Daily MACD still continues to remain bullish as it trades above its signal line.

On the derivative front, the NIFTY  February series have added over 8.10 lakh shares or 4.39% in Open Interest. This signifies creation / addition of large amount of short positions in the system.

Coming to pattern analysis, as mentioned in our previous editions, the Markets have been making attempts to find a  bottom for itself. Though a temporary bottom around 7250 levels have been made and Markets did show some pullback twice near those levels, it has not confirmed this bottom so far. With the volatile oscillation of Markets in a broad range continuing, the Markets have not yet established any firm bottom as of now. The chances of the Markets testing the levels of 7250 again and breaching it as well remain slim in the near future but we have to remain at elevated levels of caution as there has been no confirmation of bottom so far. However, very less amount of delivery based selling and sharp upsurge in the VIX  and large amount of shorts that are seen in the system can show some mild chances of the Markets  holding on to its current levels. It would be critical to see if the Markets are able to keep its head above 7250 levels to avoid any major fresh weakness from creeping in again.

All and all, as mentioned above, the intraday trajectory that the Markets form would be critical to watch out for. With the levels of shorts that are seen in the system, we reiterate to avoid any fresh shorts and use any such sharp dip to make fresh purchases. However, such purchase should be kept on very selective basis and the quantum of exposure should be kept limited. Overall, while maintaining liquidity, cautious outlook should be continued in the Markets 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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