Wednesday, October 19, 2016

Daily Market Trend Guide -- Wednesday, October 19, 2016

MARKET TREND FOR WEDNESDAY, OCTOBER 19, 2016
Domestic equity markets had a decent day yesterday as it saw a technical pullback. We had mentioned in our yesterday’s edition that the NIFTY has achieved a measuring implication arising out of a breach from descending triangle formation. Following this, a technical pullback was expected however, the yesterday’s session remained better than expected. Today, we can expect a mildly positive opening but the NIFTY is likely to continue to find resistance at 8690 and then the 50-DMA which stands at 8704.

Today, the levels of 8510 and 8545 will act as immediate resistance levels while supports will come in at 8620 and 8580 levels.

The RSI—Relative Strength Index on the Daily Chart is 49.2011 and it remains neutral as it shows no bullish or bearish divergence or any failure swings. The Daily MACD still continues to remain bearish as it trades below its signal line.

On the derivative front, the NIFTY October futures have 3.35 lakh shares or 1.79% in Open Interest. This clearly signifies heavy short covering in the Markets.

Coming to pattern analysis, the NIFTY not only achieved the lower target arising out of its negative breach from a Descending Triangle Formation, but also tested its 100-DMA levels. While taking support at these levels, a technical pullback was expected. This happened yesterday, however, it becomes important to note that the NIFTY still continues to trade below its 50-DMA which is 8704 and the level of 8690 which was the support that it broke on the downside.  Both of these levels will continue to act as resistance for the NIFTY in the near term.

Overall, even after yesterday’s rise, the NIFTY is not completely out of the woods. It continues to remain in a falling channel created from 8968 levels and also it trades below the 8690-8710 resistance zones. Further, it is also evident that the rise that we saw yesterday was more on account of short covering it is important that this gets replaced with fresh buying. Until this happens, we will continue to see the NIFTY oscillating in a broad trading range and it will also remain vulnerable to selling bouts from higher levels. We reiterate our cautious view and advise to continue to use all up moves in protecting profits on existing positions.

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


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