Proportionate rebound likely

TECHNICALS

The markets opened on a bullish note and proceeded to trade higher through the day. The benchmark indices gained nearly 4 per cent as the short squeeze continued for the second session. Traded volumes were lower than the previous session, which indicates a lack of buying conviction at higher levels.

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

The F&O data for the previous session saw a decline in the put-call ratios, thereby confirming the technical outlook that the downsides were capped in the absolute short term.

The indices closed at the upper end of the intraday range as the short covering was witnessed till the fag end of the session and the retail segment abstained from big ticket buying.

The markets are dominated by the institutional / high net worth players and small investors are disoriented by high volatility in the markets.

The ratio of total numbers of shares traded to the number of trades indicates a overbearing domination by big ticket players. The 3718 resistance that I had advocated was clearly and convincingly overcome even on a closing basis.

The 60 minute charts are indicating the average traded price (ATP) being the highest in 3 sessions - a powerful reversal indicator for short term speculators as per Gann swing techniques.

The coming session will see an intraday range of 3874 on advances and 3681 on declines. My investors will recall the 3886 level was a crucial support for the short term traders on declines and now it will reverse into a resistance on the upsides.

The outlook for the markets on Friday is that of guarded optimism as the upmove is along expected lines. As I had mentioned yesterday, a proportionate bounce is underway after a savage fall.

The possibility of a "double whammy" is high as traders trapped on the declines may get trapped again on the advances. The rally is on weak legs and can spring a surprise or two.

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.