Daily Market Trend Guide -- Wednesday, February 03, 2016

MARKET REPORT                                                                                        February 03, 2016

Markets gave up nearly all of its Friday’s gain as it succumbed once again amid global weakness and ended the day with a significant cut. The Markets saw a stable and mildly positive opening and the morning trade was spent in a very narrow range in sideways trajectory ahead of RBI Credit Policy announcement which remained in line with expectations as it kept key rates unchanged. The Markets saw a sharp spurt after initial reaction while it formed its day’s high of 7576.30. However, this remained short lived as the Markets pared all of its gains and even dipped into the negative territory. It further saw a very sharp near-vertical fall in the last hour of the trade as it went on to form a day’s low of 7428.05 coming off nearly over 140-odd points from the high point of the day. The Markets finally settled the day at 7455.55, posting a net loss of 100.40 points or 1.33% while forming a lower top and lower bottom on the Daily Bar Charts.

MARKET TREND FOR WEDNESDAY, FEBRUARY 03, 2016

Today, in line with the prevailing global weakness, we are likely to see a negative opening in the Markets. However, looking at the overall technical structure of the Charts and reading of lead indicators, we are likely to see some resilience from the Markets are lower levels and there are less chances that the Markets makes fresh lows. However, at the same time, it also becomes important to note that the levels of 7540 has once again proved to be a resistance and this level will remain a key level to watch out for.

For today, the levels of 7490 and 7540 will act as immediate resistance levels for the Markets. The supports come in at 7405 and 7360 levels.

The RSI—Relative Strength Index on the Daily Chart is 43.4998 and it remains neutral as it shows no bullish or bearish divergence or failure swings. The Daily MACD continues to remain bullish as it trades above its signal line.

On the derivative front, the NIFTY February futures have shed over 7.31 lakh shares or 3.64% in Open Interest. The NIFTY PCR stands at 0.81 as against 0.87 yesterday.

Coming to pattern analysis, we had mentioned often in our previous editions that the Markets have attempted to form a bottom around 7250 levels but have not confirmed it as yet. We had also mentioned that in absence of any confirmation of bottom, what we were seeing are just pullbacks and therefore we continue to remain vulnerable to intermittent selloffs. While this precisely happening, the importance of levels of 7540 remains sacrosanct. This was the important support that the Markets broke on the downside and this is the level which the Markets will continue to resist in the immediate short term.

As mentioned in the beginning, though the level of 7540 continues to remain a key level to watch out for, the Markets are also likely to show resistance to major downsides. Though the Markets may remain weak in the immediate short term remaining affected by global weakness, bouts of short covering from lower levels cannot be ruled out. While expecting resilience by the Markets at lower levels, 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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