Bulls to retain advantage

TECHNICALS

The oversold markets roared back as the overseas cues turned positive after a drought of good news. The markets barely needed a reason to rally as the short squeeze itself propelled the markets higher.

Traded volumes contracted and the market breadth was positive as the BSE & NSE combined figures were 2621 : 1246. The capitalisation of the breadth on a commensurate basis was also positive as the figures were Rs 14202 Crs : Rs 1133 Crs.

The markets have closed in the upper half of the intraday range and that too on positive internals, though volumes still remain uninspiring. Scepticism and lack of buying power will hound the bulls in the near term. The 3465 / 3100 range advocated for Monday was overcome on the upsides as the Nifty closed above resistance specified. I had already mentioned that the oversold markets were to witness a calibrated decline, if any. The coming session is likely to witness a range of 3635 on advances and 3340 on declines. The bullish pivot for the coming session will be the 3420, above which the bulls will dominate the bears.

The market internals indicate a low turnover as the participation levels fell due to the sudden ascent. The number of trades decreased and the average ticket size was lower, indicating a short covering bias.

The outlook for the markets on Tuesday is that of continued optimism, subject to overseas remaining neutral to positive. Avoid aggressive fresh short sales. Long term investors may may continue buying frontline blue chips.

Vijay L. Bhambwani
(CEO – BSPLindia.com)

The author is a Mumbai-based investment consultant and invites feedback at vijay@BSPLindia.com

Mandatory disclosure: the analyst has no exposure to any scrip/s recommended above.