Wednesday, February 8, 2017

Daily Market Trend Guide -- Wednesday, February 08, 2017

MARKET TREND FOR WEDNESDAY, FEBRUARY 08, 2017
Though with less intensity, first signs of some overdue correction in the Indian Equities became evident as the benchmark NIFTY50 ended the day with modest losses of 32.75 points or 0.37%. Today, we expect a subdued opening in the Markets and the analysis remain more or less on similar lines as we expect some corrective activities to continue. Markets will also react to the RBI Credit Policy Review which comes up later as we go ahead in the session. Rate cut of 25 bps is expected but overall this is likely to remain a non-event. Bank stocks anyway are  trading  extremely overbought and may find any reason for impending corrective activities. For immediate short term, 8820 has now become a important resistance to watch out for.

For today, the levels of 8820 and 8865 will act as immediate resistance levels. The supports will come in lower at 8720 and 8675 levels.

The RSI—Relative Strength Index on the Daily Chart is 71.5979 and it is neutral as it shows no bullish or bearish divergence or any failure swings. However, it still continues to trade in “overbought” territory. The Daily MACD remains bullish trading above its signal line but has started to flatten its trajectory. On the Candles, an Engulfing Bearish Line has occurred. This is significant because it has formed during an up move and it markets a potential halt in the current up move. It is an indication that the momentum has started to shift to bearish hands.

The NIFTY February futures saw shedding of over 2.85 lakh shares or 1.31% in Open Interest. This shows minor profit taking from higher levels.

While having a look at pattern analysis, the NIFTY50 is very near to its major pattern resistance levels. Though these levels fall ahead of the current closing level, the overbought nature of the Markets is causing impediments for upward moves. The lead indicators have been overstretched over past couple of days and this makes the immediate structure of the Markets slightly dangerous and unhealthy. Though there are no signs of reversal of trend at current levels, some amount of correction from the current levels cannot be ruled out.

All and all, it is important to note that corrections within an uptrend are healthy phenomenon and often prepares Markets for further up moves. Minor corrective activities are likely to continue but NIFTY may still proceed to test its logical targets of 8850-8900 mark in coming days. But currently, given the overbought nature of the Markets, some correction will be imminent and continues to remain overdue. We continue to reiterate adopting highly cautious approach to the Markets and vigilantly protect positions at higher levels.

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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