High volumes signal weakness

TECHNICALS

The markets opened on a steady note only to succumb to profit sales through the day. The benchmark indices closed with net losses of nearly 2 per cent. Traded volumes were sharply higher than the previous session.

The market breadth was highly negative as the BSE and NSE combined figures were 1:3 and the capitalisation of the breadth was also negative.

The F&O data of the previous session shows a sharp build-up of fresh positions which had made the markets top heavy.

The indices have closed at the lower end of the intra-day range and the high volumes are a pointer towards weakness. It may be recalled that I had indicated weakness in the markets on the basis of key reversal patterns being witnessed on the short term charts across the exchanges in the past two sessions.

It has been historically seen that key reversals at significant highs has ushered in fresh bouts of selling which have predictable patterns.

The intraday levels for the Nifty spot will be at the 3077.51 on declines and 3165.89 on advances. Only beyond these two parameters, will a fresh move unfold in the absolute near term "� in either direction.

The outlook for the markets on Thursday is that of continued caution and I would advocate abstinence from bottom fishing as long as the markets do not signal a sustainable base.

In the coming session, upsides are likely to be greeted with offloading due to significant overhead supply and paring of long positions in the derivatives segment.

Sectoral strength is being witnessed in the technology sector which has shown relative out performance as select counters have been holding ground in the face of selling pressure.

TCS is likely to remain bullish as long as the scrip trades above the 1703 levels for a major part of the session on Thursday. Purchases maybe initiated for the medium term perspective in small lots only as volatility is likely to remain high.

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.