High traded volumes could spell trouble

TECHNICALS

The markets turned back to close with a mild loss after opening on a positive note. The 4393 support advocated yesterday held as the Nifty turned higher exactly from this inflection point.

The 4445 resistance forecast for Tuesday saw the Nifty retrace from the 4434 level itself as the bulls lacked the conviction to buy at higher levels. Traded volumes spiked higher "� a negative sign for a downtick session.

The market breadth was negative as the combined exchange figures were 1604 : 2140. The capitalisation of the market breadth was positive as the combined exchange figures were Rs 8641 crs : Rs 6854 crs. The F&O data for the previous session indicate a 2.57 per cent increase in net long positions.

The indices have closed at the lower end of the intraday range which is a negative indicator. The daily bar chart of the Nifty displays a bar reversal (closing lower than opening and the intraday high being a significant high of the current move, volumes being high) which is a sign of a short-term resistance.

Unless the bulls take the Nifty past the 4435 levels, a fresh upmove is likely to be elusive and a decline below the 4385 support will be bad news for short-term bulls. Declines on higher volumes are warning signs that day/swing traders should look out for in the coming sessions.

The outlook for the markets in the coming session is that of caution as the short-term traders are reticent about enhancing exposure on the long side. Overhead supply is slowing down the rate of ascent, which is confirmed by the easing implied volatility in the futures segment. Wait and watch rather than resort to bottom fishing.

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 the scrips mentioned above.