The traded volume imperative

TECHNICALS

The markets opened on a firm note and ended the day with minor losses as bulls preferred to pare exposure at higher levels. Traded volumes were marginally higher compared with the previous session and the 10-day average.

The market breadth was negative as the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) combined figures were 1208 : 1635. The capitalisation of the breadth was marginally positive as the combined exchange figures were Rs 2899 crore : Rs 2392 crore.

The indices have closed lower, thereby snapping their three-day long winning streak. The higher tops and bottoms formation has been halted and the support has come on the 13-day SMA's which is a sign of a temporary correction as of now.

The supports were seen at levels specified yesterday and the new lower target are at 1614 and 5166 levels, in case the corrections deepen.

On the higher side, selling is likely to be seen at 5228 and 1644 levels on the Sensex and Nifty respectively. Traded volumes, open interest and market breadth will play decisive role in determining short term trends.

The outlook for the markets on Friday is that of abundant caution as bulls are likely to be on the backfoot. Should the oil prices and overseas markets have adverse implications, there can be a short term downward momentum in the domestic markets as well.

The most prudent approach would be to sell deeply out of money strike calls on the index frontline counters in small lots as the yields are good. Traded volumes must be curtailed owing to higher volatility expected.

Vijay L Bhambwani
(CEO - BSPLindia.com)

The author is a Mumbai based investment consultant and invites feedback at vijay@BSPLindia.com or (022) 23400345 / 23438482.

SEBI disclosure: the analyst has no exposure to the scrips mentioned above.