Thursday, February 2, 2017

Daily Market Trend Guide -- Wednesday, February 01, 2017

MARKET OUTLOOK FOR WEDNESDAY, FEBRUARY 01, 2017
Profit taking finally emerged from higher levels perfectly on analyzed lines as the Markets chose to go into Union Budget on a cautionary note. The benchmark NIFTY50 ended near the low point of the day posting net loss of 71.45 points or 0.83%. Today as we face the Union Budget, it is more than obvious that we will be encountered with large amount of volatility. Though the NIFTY has ended near the pattern supports, technical levels will be seen violated on either side today. We expect a range bound trade in the morning and we will see the Markets reacting once the proposals start rolling in.

Broadly speaking, the levels of 8672-8700 have now become an immediate top and therefore resistance levels for the Markets. The supports come in at 8500 and 8415 levels.

The Relative Strength Index on the Daily Chart is 64.9035 and it remains neutral showing no divergence. It has just crossed below from a topping formation which is Bearish. The Daily MACD remains bullish trading above its signal line but it has flattened its trajectory. A black body on Candles occurring near the resistance / topping area has established credibility of the resistance zone of 8670-8700 levels.

The NIFTY February series have seen shedding of 4.92 lakh shares or 2.47% in Open Interest. This makes some profit taking evident from the higher levels.

Let us now have a look at pattern analysis. As mentioned of ten, the NIFTY has risen close to 10% in less than a month. The overbought nature of the Markets made some corrective moves imminent. If we discount the Union Budget, and if the NIFTY still continues to correct, it would not be making any damaging move on the Charts. The correction would remain perfectly healthy, normal and on expected lines. However, given the Union Budget, we will see some good amount of volatility in the session. Any downsides up to the levels of 100-DMA will not create or cause any structural damage on the Charts. Upsides will face immediate resistance at 8670-8700 zones.

Importantly, it is important to note that all macro economic factors remain very much in place. The liquidity conditions, in fact, have improved post demonetization as the banks have now become flushed with funds. Liquidity was never a problem in 2016 and it is not expected to remain a problem in 2017 as well. Also, the Markets will also closely watch the issue of Long Term Capital Gains – LTCG which is likely to be flirted with. It would be positive if LTCG are left in its present condition with no change. Any change such as introduction of LTCG up to 5% or any proposal to increase of lock-in tenure from present 1 year to more will invite negative reactions in the Markets.

We point out at this juncture that technical levels will be violated on either side because of volatile reactions that are normally witnessed. It is advised to remain absolutely light and refrain from creating any serious exposure until a directional bias is established and the Union Budget is fully digested.

(Milan Vaishnav, CMT, is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)
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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