Watch volumes on declines

TECHNICALS

The markets opened on a positive note only to flatter and deceive at the higher levels. This was the second time in three trading sessions that the indices turned on a dime, which are signs of distribution at higher levels.

The market breadth was marginally positive as the combined exchange figures were 2006:1894. The turnover on Monday was higher than the previous session, which is a sign of weakness on a down tick session.

The capitalisation of breadth was negative as the combined exchange figures were Rs 14,664 cr:Rs 16,967 cr. The F&O data for the previous session indicated a short selling bias at higher levels as the bears ramped up fresh shorts.

The indices have closed off their intraday highs and settled in the lower half of the day's range. Coming with higher traded volumes and near delta inflection highs, the picture does not appear to be pretty in the absolute short term.

The intraday range specified for Monday at the 5790/6075 held as the Nifty did not test these parameters in either direction, though the bias was negative.

The Nifty is under severe stress at higher levels and the tsutsumi pattern on oriental charts indicates impeding weakness. A consistent trade below the 5800 level will confirm the weakness and a short term decline may occur.

The coming session is likely to witness an intraday range of 5920 on advances and 5760 on declines. Watch the traded volumes on declines as distribution is signalled by price/volumes/open interest in a weak market.

The outlook for the markets on Tuesday is that of abundant caution as the bulls may be forced on the back foot in case of a decline below the 5800 mark. Bottom fishing must be avoided at all costs.

Vijay L. Bhambwani
(CEO- BSPLindia.com)

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

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