The markets lost bullish momentum as was anticipated, and at levels predicted. The 3,245-level hurdle advocated yesterday proved to be formidable for the bulls.
The traded volumes improved over the previous session and the market internals were negative — a sign of distribution after a brief, but strong, rally. The combined exchange market breadth was negative at 1,405 : 2,383. The capitalisation of the breadth on a commensurate basis was also negative as the figures were Rs 3,509 Crs : Rs 12,919 Crs.
The market ended on a negative note with higher volumes and weak internals. These are signs of bull unloading and the same is confirmed by the oriental charts recording a “tsutsumi/daki” pattern. This pattern has bearish implications in the absolute near term. The 3,245-3,025 range advocated for Wednesday was violated as the Nifty fell from the specified resistance right below the support.
The bulls lost control once the bullish pivot point of 3,095 was violated forcefully. The coming session is likely to witness a range of 3,165 on advances and 2,800 on declines. The bullish pivot will be 3,150, above which the Nifty spot must remain, a tall order under the circumstances. Watch the 3,075-level as a bearish pivot below which the bears may get aggressive.
The market internals indicate a higher turnover as the participation levels rose due to the distribution. The number of trades increased and the average ticket size was higher, indicating a selling bias. The capitalisation of the market was lower in line with a downtick session.
The outlook for the markets on Thursday is that of caution as the bulls are likely to be on the back foot. Should the overseas cues be weak, expect more unwinding.
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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/s recommended above.