Tuesday, August 16, 2016

Daily Market Trend Guide -- Tuesday, August 16, 2016

MARKET TREND FOR TUESDAY, AUGUST 16, 2016
The markets will reopen today after a holiday following Independence Day yesterday. Today, we can fairly expect the Markets to open on a flat to mildly positive note and look for directions. Speaking purely on technical grounds, the Markets are expected to open stable and positive and continue with the up move at least in the initial trade. However, the Markets are under consolidation and the levels of 8700-8725 zones will continue to pose major and important resistance to the Markets.

Today, the levels of 8705 and 8725 will act as immediate resistance levels for the Markets. The supports come in at 8630 and 8610 levels.

The RSI—Relative Strength Index on the Daily Chart is 60.1510 and it remains neutral as it shows no bullish or bearish divergence or any failure swings. The Daily MACD stays bearish as it trades below its signal line. On the Weekly Charts, the Weekly RSI is 68.7229 and this too remains neutral as it shows no bullish or bearish divergence or any failure swings. The Weekly MACD remains bullish trading above its signal line. On the Candles on the Weekly Charts, a Hanging Man  formation has occurred for the second consecutive week. Though this may not be a classical Hanging Man formation, it has potential enough to halt the up move. However, this always requires confirmation.

On the derivatives front, the NIFTY August futures have shed over 8.75 lakh shares or 3.43% in Open Interest. This makes quite evident that the rise that we saw on Friday was more on account of short covering.

Coming to pattern analysis, the Markets have broken out of the rising channel formation, a channel that is drawn from the February lows. As mentioned often in our previous editions, this channel was getting narrower and a sharp movement on either side was not ruled out. 
Currently with the channel getting narrower, the Markets showed a downward breach, only to move up again. However, it still continues to trade below and outside the said channel. Further, while having a look at the Weekly Charts, the pattern clearly suggests potential halting of the uptrend. Though this remains a high possibility, this always requires a confirmation on the next weekly bar.

Overall, given the above facts, it is very much evident that the Markets are very less likely to give a runaway rise on the upside. In case of such runaway rise, the sustainability of such rise would be questionable. The Markets are likely to continue to remain in corrective mode. However, given the inherent buoyancy of the Markets, such corrective actions will be characterized with limited downsides and more of range bound sideways movements. The stocks / sectors that underperformed over previous two weeks are likely to lead. Overall, we continue to reiterate to use dips to make selective purchases at lower levels.


Milan Vaishnav, CMT
Technical Analyst

Member: Market Technicians Association, (MTA), USA
Member: Association of Technical Market Analysts, (ATMA), INDIA

+91-98250-16331

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