In zero-resistance zone

TECHNICALS

The markets opened on a shaky note and proceeded to trade to record highs through Tuesday.

The benchmark indices surged higher with the Sensex closing at a all-time high and the Nifty within kissing distance from the previous top.

The traded volumes were lower than the previous session and that shows a tendency to book profits at higher levels.

The market breadth was marginally negative as the ratio of advancing to declining shares on the Bombay Stock Exchange and the National Stock Exchange combined stood at 1572 : 1703.

The capitalisation of the breadth was positive as the figures on the two bourses taken together stood at Rs 6,050 crore: Rs 2,011 crore.

Derivatives data for the previous session indicate a slowing down in the addition of open interest and the put-call ratio on the Nifty scaling new highs.

On the downsides, expect support at the 2138 and the 6949 levels on the Nifty and Sensex in the coming 2 sessions as per the retracement studies.

Resistance on the upsides will be seen at the 2184 / 2188 on the Nifty which are the previous top and the channel top of the rising channel which is a part of the "V" shaped recovery pattern on the short term charts.

The commensurate level on the Sensex will be at the 7128 in the coming session. Traded volumes must remain higher than the 10 day average in the remaining part of the week to signal a sustainable bullishness.

The outlook for the markets on Wednesday is that of optimism. Barring profit sales, I do not foresee a major fall. It must be noted however that the fall is likely to be volatile and vicious as has been the upmove in the last few sessions.

A bumpy ride is ensured. Stock specific activity is likely to be seen on ONGC which has broken out of the Rs 940 congestion levels for the first time after January 9, 2004.

Buying is recommended in the cash and derivatives segments in small lots as long as the scrip remains above Rs 940 with a target of Rs 966 in the near term. Traders must initiate trades on lower volumes to protect their risk capital.

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.