Tuesday, February 7, 2017

Daily Market Trend Guide -- Tuesday, February 07, 2017

MARKET TREND FOR TUESDAY, FEBRUARY 07, 2017
The benchmark NIFTY50 had a better than expected session as it continued to over-stretch itself while being in overbought territory as it ended yet another day with gains ending 60.10 points or 0.69% higher.  At this juncture, we very explicitly raise a word of caution. We do not dispute the underlying buoyancy in the Markets but in the same breath, the way the NIFTY is overbought and the manner in which the lead indicators are overstretched, some corrective activity from higher levels is very much long overdue. While raising the cautious undertone, we explicitly point out not to ecstatically chase the rally as this is now getting bit unhealthy. Some corrective action, in form of some consolidation would be in fact healthy for the Markets to help it move higher than current levels.

The levels of 8830 and 8865 will pose resistance to the Markets and the supports will exist much lower at 8735 and 8660 levels.

The RSI—Relative Strength Index on the Daily Chart is 75.1939 and it has posted a fresh 14-period high which is bullish. However, we cannot ignore the fact that it is trading highly overbought. The Daily MACD continues to trade above its signal line. On Candles, a rising window (gap) has occurred. Though it is a bullish undertone, the overbought nature of the Markets cannot be ignored and we have to approach this formation with great amount of caution.

The NIFTY February futures have added over 3.68 lakh shares or 1.71% in Open Interest which implies continuing buoyancy in the Markets.

While coming to pattern analysis, the way the buoyant undertone is evident, we cannot discount the fact that the NIFTY is trading highly overbought. The lead indicators are evidently overstretched and therefore it is clear that such ecstatic chase of the up move can be turn dangerous as the corrective activities too tend to be equally sharp. While we accept and acknowledge the fact that the overall trend remains unanimously on the upside, some short term correction is long overdue and it would be required to make the Markets healthy. The Bollinger Bands are nearly 46% wider than normal indicating high prevailing volatility. It also increases the chances of the NIFTY returning in a consolidation range.

Overall, we now strongly advise to approach the Markets with highly levels of caution. We strongly recommend refraining from creating any fresh long positions and protect profits wherever applicable. The unabated rise while remaining overbought can become unhealthy and can induce short term but sharp corrective actions. Remaining light on positions or reducing positions with each higher levels and adopting cautious outlook is advised for 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



+91-98250-16331 

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