Oversold state may trigger rally

TECHNICALS

The markets opened with a gap down after the "daki" pattern advocated yesterday took it's toll. The market breadth was outright negative as the combined exchange figures neared the 1:3.5.

The traded volumes spiked higher, a negative indicator on a down tick session as higher volumes are indicative of unwinding by short term players.

The indices have closed off their intraday lows, though in the lower half of the daily range. The 5950 support did not hold as even the closing was below this threshold.

The wide intraday range on Tuesday was followed by a big move on Wednesday, in the bargain making an oversold reading on the short term oscillators.

The coming session may witness some support at 5845 as Fibonacci retracement studies point towards a rough and ready buying inflection point at this level. Resistance may emerge at the 6020 - 6065 band, in case of an upmove.

The key to the short term trend determination will be the volume/open interest correlation in case of an upthrust. Higher volumes will mean greater credibility for the relief rally.

The outlook for the markets on Thursday is that of guarded optimism. Should the overseas cues be steady/positive, expect a relief rally.

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.