Downward trajectory calls for caution

TECHNICALS

The markets opened on a weak note and closed with continued losses as overseas cues and absence of bulls dragged sentiments lower. The traded volumes contracted and the market breadth was negative as the combined exchange figures were 1560 : 2259. The capitalisation was negative as the commensurate figures were Rs 5536 crore:Rs 7009 crore.

The indices have closed at the upper end of the intraday band and on negative market internals. The poor traded volumes indicated a withdrawal of the retail traders in the cash segment. The 4490 / 4335 range advocated for Tuesday was violated as the index fell below the support on an intraday basis.

The closing in the upper half of the session indicates a hammer formation on the oriental charts and suggests a resistance by the bulls to further declines as the lower tops and bottoms formation has been in existence for 5 days in a row - 5 being a Fibonacci number.

The coming session is likely to witness a range of 4440 on advances and 4315 on declines. The bullish pivot will be 4365, above which the bulls will have an edge and below the 4345 levels the bears will have an edge.

The market internals indicate a lower turnover as the participation levels fell due to the downtick session.

The outlook for the coming session is that of caution as the markets are on a downward trajectory. However, aggressive fresh shorts are unjustified.

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.