Bear covering may trigger upside

TECHNICALS

The markets opened on a bearish note and created history as trading was halted due to slam dunk selling pressure. The decline continued for most part of the session, though the last 90 minutes witnessed sizeable bear covering that indicates a temporary panic bottom in the near term.

The market breadth was bearish as the combined exchange figures were 213:3363. The capitalisation of breadth was also positive as the commensurate figures were Rs 1837 crore:Rs 25685 crore.

The indices have closed at the upper end of the intraday range, making a hammer formation on the daily charts. The Gann swing will turn positive if the Nifty trades above the "body" of the candle made on January 22.

The short term oscillators indicate an oversold reading, making the market ripe for a corrective upmove. The 4930 support will be an inflection point.

The intraday range for Wednesday will be at the 5360 on advances and 4635 on declines. The range indicates a bias towards the upside, provided the upmove is on higher volumes.

The market internals indicate a lower turnover as the participation levels fell marginally. The number of trades decreased and average ticket size was higher, indicating presence of stronger hands.

The outlook for the markets on Wednesday will remain that of cautious optimism as the overseas cues and bear covering will see short term volatility with a northward bias. High risk appetite players may initiate purchases in small lots.

Vijay L. Bhambwani
(CEO- BSPLindia.com)

The author is a Mumbai-based investment consultant and invites feedback at vijay@BSPLindia.com

Mandatory disclosure: the analyst has no exposure to any scrip recommended above.