Monday, May 16, 2016

Daily Market Trend Guide -- Monday, May 16, 2016

MARKET TREND FOR MONDAY, MAY 16, 2016                                              
The Markets are poised at a critical juncture and the analysis for today continues to remain on similar lines that of Friday. The Markets are likely to see a quiet and modestly negative opening and would look for directions. The Markets have made a lower low after forming a intermediate top of 7970 levels and currently rest at its 200-DMA which is 7915.99 today. Any opening below this will have the levels of 200-DMA acting as resistance and it would  be critically important for the Markets to try and trade above its 200-DMA to continue to remain under consolidation and avoid any downward breach.

For today, the levels of 7845 and 7890 will act as immediate resistance levels for the Markets. The supports come in lower at 7765 and 7720 levels.

The RSI—Relative Strength Index on the Daily Chart is 52.52 and it remains neutral as it shows no bullish or bearish divergence or failure swings. The Daily MACD remains bearish as it trades below its signal line. On the Weekly Charts, the Weekly RSI is 52.59 and this too remains neutral without showing any bullish or bearish divergence. The Weekly MACD is bullish as it trades above its signal line.

On the derivative front, the NIFTY May futures have shed yet another 7.57 lakh shares or 4.44% in Open Interest. The NIFTY PCR stands at 0.88 today.

Coming to pattern analysis, after reversing its trend from the February lows, the Markets moved past all of its DMAs and formed its intermediate top in the zones of 7970-7990 levels. Having said this, since last couple of sessions, the Markets have formed a symmetrical triangle formation and this formation can act both as a continuation pattern as well as reversal in some cases. The RSI on Daily Charts too has reported a lower high and currently is within that formation. Having said this, it would be crucially important for the Markets to trade above 200-DMA which stands at 7815 today in order to avoid any weakness. On the Weekly Charts as well, the Markets have resisted to a falling trend line pattern resistance drawn form 8600-levels. Overall, in given circumstances, if the Markets see a downward breach it will also see itself breaching on the downside from this symmetrical triangle formation as well as 200-DMA and this will bring some more weakness in the Markets, at least in the immediate short term.

Overall, having said this, while watching the behavior of the Markets vis-à-vis the levels of 200-DMA, we reiterate a caution in the Markets once again and no major purchases should be made until the Markets sees a significant up move above 7950 levels. Until this happens we are likely to see all up moves getting sold into and in any case of downward breach, the levels of 7700-7650 cannot be ruled out. Maintaining liquidity along with cautious outlook is advised for today.


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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