Abstain from fresh longs

TECHNICALS

The markets opened on a steady note and attempted to rally with little success. The bears proved to be formidable once the 5490 level pivotal support advocated yesterday gave way with forceful volumes.

The ensuing decline occurred with expected velocity. The fall was accompanied by higher traded volumes and negative market internals as the combined exchange figures were 1396:2487 and the capitalisation of breadth on a commensurate basis was Rs 7330 cr:Rs 31908 cr. The F&O data, however, showed 4 per cent rise in long positions.

The indices have closed at the lower end of the intraday range as the 5490 support pivot proved to be the death knell for intraday bulls. Once the bears pushed the Nifty below this inflection point, the bulls did not recoup their lost initiative.

The 5455 / 5595 intraday range specified for Friday was not tested on the upside but violated the support, indicating a sliding daily range. A tsutsumi pattern on the Japanese candle charts and an "outside day" bar reversal on the western charts have been formed.

The volumes were huge, oscillators continued in overbrought zone and intraday highs were the highs of the upmove. The intraday highs will now act as hurdles for the bulls and unless these are overcome convincingly, I would advocate abstaining from fresh longs.

The outlook for the market on Monday is that of guarded optimism and routine profit sales. According to time/price studies, the second week of October is a possible resistance time for the indices and abundant caution is hence called for.

Traders familiar with Fibonacci predictive analysis will note a cycle time pattern completion that may see the markets consolidating before the next leg of the upmove fires off.

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 recommended above.