Back in the bearish channel

TECHNICALS

The markets opened on a firm note on Tuesday after the massacre on Monday. It proceeded to record its highest ever gains, in stark contrast to the selloff tsunami of the previous session.

Traded volumes were marginally higher than in Monday's session and in line with the 10-day average.

The market breadth was very positive as the ratio of advancing to declining shares on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) combined stood at 1813 : 593.

The capitalisation of the market breadth was also extremely positive with the figures being Rs 7,282 crore: Rs 419 crore on the two bourses taken together.

The indices have ascended as the bears have squared up their positions partially. The barometers are now back in the bearish channel, which had been violated downwards earlier.

The resistance on the upsides will be seen at the 4964 and the 1548 levels on an intraday basis on the Sensex and the Nifty, respectively.

Above these levels, a further 2 per cent upmove maybe possible.

On the lower side, I expect support at 4566 and the 1385 levels in the coming few sessions.

Due to extreme volatility, I expect the traded volumes to remain subdued and impact costs to be extremely high.

The outlook for Wednesday is of cautious optimism, and will be influenced by news considerations. Should the overseas markets be firm, and the news remains constant, I expect the upward pullback to continue.

Traded volumes should be kept to the minimum in view of the higher volatility.

Vijay L Bhambwani
CEO, BSPLindia.com

The author is a Mumbai-based investment consultant and invites feedback at vijay@BSPLindia.com or (022) 23400345 / 23438482.

Sebi disclosure: The analyst has no exposure to the scrips mentioned above.