MARKET TREND FOR THURSDAY, OCTOBER 06, 2016
Choppiness prevailed in the domestic equity markets as it
remained volatile in a given range. As mentioned in our yesterday’s edition,
the zones of 8800-8850 posed resistance as the Markets all of its opening gains
once it resisted at 8806 levels. We keep our analysis more or less on similar
lines again as the NIFTY remains trapped in Descending Triangle formation and
therefore today, and for coming sessions, the zone of 8800-8850 will continue
to pose critically stiff resistance.
For today, the level of 8775 and 8810 will act as immediate
resistance while supports will come in at 8690 and 8665 levels.
The RSI—Relative Strength Index on the Daily Chart is
51.0806 and it remains neutral as it shows no bullish or bearish divergence or
any failure swings. The Daily MACD stays bearish while trading below its signal
line. On the Candles, and engulfing black candle has occurred following a doji
/ long lower shadow. This has a potential to bring in short term weakness.
However, this needs a confirmation on the following day.
On the derivative front, the NIFTY October futures have added
just over 1 lakh shares in Open Interest. There is no significant unwinding of
positions that was seen in the Markets.
While having a look at pattern analysis, it is very much
evident that the NIFTY continues to remain trapped in a Descending Triangle
formation. This formation has been characterized with falling tops and the
bottoms remaining at 8690. In the given context, the level of 8690, which is
the neckline, remains very critical support for the Markets. On the other hand,
given the falling nature of the tops, in coming days 8800-8850 zones will pose
very stiff resistance. It is further evident that in case the NIFTY breaches
8690 on the downside, we will see some more weakness creeping in. For the
Descending Triangle to fail, it would be necessary that the NIFTY moves past
8850 levels. Until this happens, it will remain vulnerable to selling pressure
from higher levels.
Overall, just like yesterday, today as well we keep our
reading and conclusion on similar lines. NIFTY remains in the present
potentially bearish formation of a descending triangle. Therefore, though we
will continue to see stock specific purchases, it is advised that more cash
levels should be maintained and all up moves should be continued to be used to
protect profits at higher levels as intermittent bouts of profit taking at
higher levels cannot be ruled out.
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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