Technical Analysis of Market Trends - February 2016 :: Edelweiss

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• Bears have been dominating the global markets since the start of 2016. Nifty has fallen by 9%, in line with corrections witnessed in global markets. Indian markets have been a laggard in the recent upmove of last one week which indicates weakness. Based on long term price pattern, Nifty may continue to remain in a corrective phase and trade in the range of 6800-7350 levels going forward.
• US Dollar index continues to show sideways action in the broad range of 92-100 while recent pullback from 100 mark has led to a rally in Gold which has changed the direction of its medium term trend.
• Safe haven buying is witnessed in US 10 year bond Futures in last couple of months.
• After a decline of over 40% in last four months and formation of multiple swing low near $25, we expect crude oil to consolidate in the range of $25-35 for next few weeks.
• Outflow of funds by FIIs have accelerated in the year 2016 with over 20k crores of sales figures in cash market. It will be difficult for Indian equities to resume its  uptrend until these selling pressure eases.
• Global markets are currently witnessing a countertrend move which might extend further as CBOE VIX is below 25 mark. However, the medium term trends are still down hence, investors should be cautious against building up aggressive longs.
• In the absence of any price reversal in the monthly price chart of Nifty, it should be assumed that the downtrend is not over.
• The options open interest structure suggests that crucial resistance zone is placed at 7300-7400 levels while 7200 / 7000 is likely to lend support.
• Based on above mentioned evidences, we believe that the Indian equity index is in a downtrend and is currently witnessing a countertrend move. We expect the current upmove to halt near 7350 levels in the short term followed by another round of selling towards 7000 levels. Change of medium term trend will happen only on close above 7500 levels.

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