Routine profit-taking cannot be ruled out

TECHNICALS

The markets gave a clear mandate to the bulls as the benchmarks recorded fresh highs.

As advocated yesterday, the outlook changed for the better only after the previous session highs were overcome. Traded volumes were higher than the previous session as players participated in the session's volatility.

The dragonfly doji advocated as a bullish signal had its desired effect as per Japanese candle charts. The market breadth was positive as the BSE & NSE combined figures were 2155 : 1553.

The capitalisation of the same was also positive as the combined exchange figures were Rs 13,526 crore : Rs 4,467 crore. The derivatives data for the previous session indicate continued buying support.

The indices have closed at a new high and that too on higher volumes and a positive market breadth.

The rally was fairly broadbased and the average traded price of the current month Nifty vis-a-vis the spot price points towards a possible "high pole" formation which veteran chartists identify as significant.

That the risk appetite was higher can be gauged from the bullishness in the midcap index. The rear guard action by technology stocks reconfirms the bullishness in the near term.

Traders should watch out for rallies being accompanied by higher volumes and market breadth as the commitment of traders is a crucial indicator at this juncture. Being a weekend session, the possibility of a routine profit taking cannot be ruled out.

The outlook for Friday is that of continued optimism, though the weekend factor may see some caution from retail traders. The daily charts show a breakout of a bullish channel amid positive market internals. The session is likely to belong to the bulls - as long as overseas cues are not negative.

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.