Wednesday, November 16, 2016

Daily Market Trend Guide -- Wednesday, November 16, 2016

MARKET OUTLOOK FOR WEDNESDAY, NOVEMBER 16, 2016
Indian Equities had a terribly disappointing session yesterday as it opened much lower than expected and domestic factors weighed heavy on the Markets as NIFTY went on to test its 200-DMA and ended a notch below it while it ended yet another day with a deep cut. Speaking purely on technical terms, we can fairly expect a technical pullback today. First, the NIFTY is yet within the filter of its 200-DMA support and secondly it stands “oversold” as clearly evident on the lead indicators. However, local factors like Demonetization, etc. would still weigh on the Markets which is certain to keep it volatile.


For today, the levels of 8165 and 8235 will act as immediate resistance levels on the Daily Charts. The supports will come in at 8090 and 8025 levels.

The RSI—Relative Strength Index on the Daily Chart is 27.4575 and it does not show any bullish or bearish divergence. Though it has reached its lowest value in last 14-periods which is Bearish, it clearly remains now in “oversold” territory. The Daily MACD stays bearish as it continues to trade below its signal line.

On the derivative front, the NIFTY November futures have over 20.17 lakh shares or massive 11.52% in Open Interest. This makes hugely evident that massive shorts have been added and this is likely to lend good support to NIFTY at current levels.

Coming to pattern analysis, the NIFTY has ended below its 200-DMA. This is technically bearish but the singular reading of this would be incorrect. It is important to note that NIFTY is still within its filter of its critically important support. Furthermore, the lead indicators clearly show the NIFTY now trading in “oversold” territory. Though it is possible that a issue can trade “oversold” while continuing its downtrend, the huge addition in OI also indicates that it is likely to keep its downsides limited.

All and all, it is very much likely that the NIFTY does not test its immediate previous lows. Even if any intraday bouts occur, now we remain very clearly and evidently exposed to a short covering technical relief rally. Even if the NIFTY continues with its bearish moves, we very categorically advice investors to refrain from creating any major short positions. It should be noted that a technical bounce back is long overdue and imminent even if we remain in a continuing downtrend. Overall, while avoiding shorts and major exposures, cautious but optimistic view is advised for today. Downsides, if any, should once again be continued to be used to make select purchases.


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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