MARKET TREND FOR FRIDAY, MAY 20, 2016
The Markets have given a downside breakout yesterday
from the symmetrical triangle formation precisely on the expected lines. Today,
the Markets may see a quiet opening today but the upsides are likely to remain capped
as the levels of 200-DMA which is 7801 today is likely to act as resistance as
the Markets have breached it on the downside yesterday. The intraday trajectory
would be critical to watch out for but as of now, every bounce is all likely to
get sold into.
For today, the levels of 7801 and 7865 will
act as immediate resistance levels for the Markets. The supports come in at
7740 and 7705 levels.
The RSI—Relative Strength Index on the
Daily Chart stand at 48.95 and it does not show any failure swing. It shows a
bullish divergence as it has not formed a fresh low even when NIFTY reported a
fresh 14-week low. The RSI stays within its formation and has not reported a
lower low.
On the derivative front, the NIFTY May
futures have added over 4.07 lakh shares or 2.53% in Open Interest.
Coming to pattern analysis, we had
mentioned in our yesterday’s edition that the more the Markets move towards its
apex, more are the chances that we witness a downward breakout. It happened precisely
that way but in case of breakout on either side, the intensity is likely to be
relatively less. The Markets have breached the support of 200-DMA but continues
to stay within its filter. Next logical support for the Markets rests at
50-DMA, which is 7720. It is very much likely that the Markets once again
consolidates in a given range before taking a larger directional bias but in
any case the levels of 7970-7990 has established themselves as a sacrosanct resistance
for the markets in the immediate short term. There would be a bearish under
tone at an intensified level if the Markets also breach the 50-DMA. Until then,
range bound consolidation cannot be ruled out.
Overall, the Markets will see a quiet
opening it is also likely that it sees a volatile movement on either side. We
continue to reiterate the strategy of avoiding shorts, and making purchase on a
very moderate note in very select defensives until the directional bias is
established. It would be equally important to keep protecting profits at higher
levels.
Milan
Vaishnav,
Consulting Technical Analyst
Member: Market
Technicians Association, (MTA), USA
Member:
Association of Technical Market Analysts, (ATMA), INDIA
+91-98250-16331
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