Bar reversal bares consolidation

TECHNICALS

The markets opened on a firm note and proceeded to end the session sideways after early gains were eroded on profit taking.

The benchmark indices were almost flat. The traded volumes were significantly lower than in Friday's session and the undercurrent was optimistic.

The market breadth was positive as the ratio of advancing to declining shares on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) combined stood at 1691 : 1438.

The capitalisation of the breadth was also positive as the figures on the two bourses wereRs 6,672 crore : Rs 3,663 crore.

The F&O data for the previous session show a rise in open interest as the bulls show a higher risk appetite.

The indices have consolidated as the charts show a bar reversal, as the closing levels are lower than the opening levls. However, traded volumes are lower, which signal a lack of panic selling.

Should the intra-day highs of Monday at 2012 and 6386 on the Nifty and Sensex, respectively, be surpassed convincingly with higher volumes, the uptrend will resume again.

Therefore, these levels are the immediate resistance levels in the coming session. On the downside, expect support at 1982 and 6291 levels in the coming session.

Traded volumes will play a key role in the trend determination as the retail participation will depend on volumes. The outlook for Tuesday is of optimism as bull market corrections tend to be of short-term nature and the bulls are unlikely to surrender their initiative just as yet.

Among stocks, the Dr Reddy's Laboratories counter has signalled a short-term breakout on the charts.

The scrip is likely to see a 2 per cent upmove in a conducive market in the short term. Buying is recommended in the cash and derivatives segments.

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.

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