MARKET TREND FOR FRIDAY, SEPTEMBER 30, 2016
The Markets, at this juncture, need to be analyzed from more
than one perspective, both technical and otherwise. The breaking of the news in
the afternoon about the India carrying out surgical strikes across LoC spooked
the equity markets while they ended with a deep cut on heavy volumes. However,
this being said, it should also be borne in mind that apart from geopolitical
tensions that sprung up suddenly, the Markets had been demonstrating short term structural weakness on the Daily
Charts. We had categorically mentioned
the zone of 8780-8820 being the potential stiff resistance levels for the
Markets. Though the news broke out in the afternoon, the Markets were already
off its highs of 8800.65. However, it is much evident that the developments
after than added to the quantum and ferocity of the downside. Today’s Market
action will see some more choppiness while the developments in the region are
closely monitored.
Speaking purely on technical terms, the levels of 8640 and
8680 will now act as major resistance levels in event of any pullback. Support
levels of 8530 and 8485 will be important to watch out for.
The RSI—Relative Strength Index on the Daily Chart is
40.1445 and it has reached its lowest value in last 14-days which is bearish.
It does not show any bullish or bearish divergence.
The Daily MACD stays
bearish trading below its signal line. On the Candles, there is a contradictory
reading. A Engulfing Bearish Candle has occurred. On one hand, it can
mark a potential pullback as it has occurred after a decline. On the other
hand, the Markets have given a downward breach from a pattern and with a Big
Black Candle, this has lent credibility to the downward breach and
explicitly more weakness in coming days.
The pattern analysis gives a clearer view as well. The
Markets have breached on the downside from a Descending Triangle formation on
the Daily Charts after forming a lower top at 8900 levels. If we take a purely
technical measuring implication of this development, it would be no surprise if
the Markets tests its 100-DMA in coming days. On the other hand, the level of
8680 that it breached will now act as a stiff resistance in event of any
pullback.
All and all, though we analyzed a technical picture above,
the geopolitical developments will continue to dominate the market movement.
The volatility and choppiness will continue to remain ingrained and we strongly
advise to preserve cash levels. Though downsides may be utilized to make
purchases, all technical pullbacks should be vigilantly used to protect positions.
Highly cautious approach with preservation of cash is advised.
Milan Vaishnav, CMT
Technical Analyst
(Research Analyst, SEBI Reg.
No. INH000003341)
Member:
Market Technicians Association, (MTA), USA
Canadian Society of Technical Analysts, (CSTA), CANADA
Association of Technical Market Analysts, (ATMA), INDIA
http://milan-vaishnav.blogspot.com
+91-98250-16331
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