Stay cautious

TECHNICALS

The markets opened on a cautious note and proceeded to trade rangebound through the day, though the bias was on the upside. The benchmark indices gained under 0.5 per cent as the weekend factor kept the aggressive traders at bay.

Traded volumes were lower than the previous session as higher levels saw caution and the weekend factor also saw a cautious approach towards fresh initiatives.

The market breadth was marginally negative as the BSE and NSE combined figures were 1411 : 1985 and the capitalisation of the breadth was positive as the figures on a BSE & NSE combined basis were Rs 6542 crs : Rs 3786 crs.

The derivatives data for the previous session indicate a 3.6 per cent increase in net long positions, which shows a bullish bias.

The indices have managed to close in the positive zone, though the gains have been truncated and volumes have dipped a tad. The minor worry is the negative market breadth which indicates retail unloading at higher levels.

Noteworthy, is the fact that Nifty is trading near it's significant top of 3490 where selling is likely from the weaker hands and short term bulls with lower risk quotients.

As advocated, a minor resistance at 3489 on the Nifty spot for Friday, the NSE benchmark did indeed turn lower from 3487 levels, thereby validating our wave count, which are also marked by the fibonacci arcs in the graphic below.

The coming session will witness minor resistance at 3489, above which the 3512 is the next inflection point on the Nifty spot.

Lower levels will see 3445 as a minor support, since the 3453 support forecast for Friday was violated, the daily chart of the Nifty shows an "outside day" where the current day's high & low is beyond the previous day's parameters. Invariably, such sessions denote a coming tug-of-war between the bulls and bears in the absolute near term. Volatility is likely to step up.

The outlook for Monday is that of cautious optimism as indices are at a critical juncture where a breakout / breakdown is around the corner.

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.