Wednesday, November 23, 2016

Daily Market Trend Guide -- Wednesday, November 23, 2016

MARKET TREND FOR WEDNESDAY, NOVEMBER 23, 2016
We refer to our previous Market Outlook wherein we had refer to what is known as “selling extremes” and had expected a pullback following this. Yesterday’s though the session remained quite volatile, the NIFTY managed to end its losing streak and ended with modest gains near the high point of the day. Though Markets have displayed basic signs of beginning of a pullback, we must bear in mind that this would be a “pullback” and not a “reversal” and for this we will require confirmations in days to come. Today, we can fairly expect the day to have stable start and NIFTY might logically proceed with its pullback. Today also is a penultimate day of expiry of current derivative series and we cannot therefore rule out volatility induced by rollovers in next two days.

For today, the levels of 8065 and 8142 will act as immediate resistance levels for the Markets. The supports come in at 7940 and 7905 levels.

The RSI—Relative Strength Index on the Daily Chart is 28.4495 and it remains neutral as it shows no bullish or bearish divergence or any failure swings. However, it still continues to tread in “oversold” territory. The Daily MACD continues to trade bullish as it remains below its signal line. On Candles, a Spinning Top has occurred which identifies a session which has narrow price action as defined by difference between open and close. However, the more important formation is that of a Bullish Harami pattern. This is a real body engulfed completely by the prior body. The importance of this formation is that it is NOT a reversal but often marks a pause or halt in a current trend (decline) and lays down chances for a pullback. However, this needs confirmation on the following day.  What makes this even more valid is color of the bullish harami candle is that of opposite color of its prior engulfing candle. There is no Hammer pattern in the Chart as the shadow of the current candle is not long enough than what it is technically required.

Coming to pattern analysis, the NIFTY has maintained to form a lower low and has managed to crawl back within the lower band of the Bollinger Band. Furthermore, the lead indicators continuing to being oversold, it continues to display higher possibilities of technical pullback continuing. The logical resistance levels until which the pullback should continue is the 200-DMA which is 8142 today. Only after that we will see if the NIFTY has just pulled back or it is trying to establish a bottom.

All and all, speaking purely on technical terms, if the NIFTY sustains above 8000-8025 mark, it may induce further short covering. It is important to note that what we expect is the pullback to continue but rollovers induced volatility will remain ingrained. Given the oversold nature of the Markets, we continue to reiterate to avoid any major shorts and any dips should be utilized to make select purchases.  We advise cautiously positive outlook for the Markets today.

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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