Entering The Bullish Zone

The bourses opened on a firm note and proceeded to trade higher through Thursday.

The Bombay Stock Exchange (BSE) sensex ended at 3012.97 (up 19.03 points) and the National Stock Exchange (NSE) Nifty 50 closed at 959.85 (up 07.70 points)

Traded volume was at Rs 961 crore on the BSE and at a much higher Rs 2,307 crore on the NSE.

The market breadth was highly positive as the advances to declines figures on the two bourses combined logged 1766 : 561.

The capitalisation of the breadth was also positive as the figures clocked on the two exchanges taken together stood at Rs 2,516 crore: Rs 749 crore.

The markets are seeing a rally which is getting broader based but lower traded volumes continue to be a nagging worry as it signals abstinence by retail participants.

The Nifty is now perched just below it's short-term resistance levels at 965 and any sustained closing above these levels will see an accelerated rally provided retail participation improves.

Traded volumes also need to surge higher. The Nasdaq is maintaining levels above 1525 and that should see an improvement in the outlook for technology stocks.

The outlook for Friday is that of optimism as the markets are now shifting gears into bullish mode in the short term.

What is important is that the 965 levels on the Nifty and 3037 levels on the sensex should be pierced.

Among stocks, Bajaj Auto has plumbed below it's 200-day simple moving average and any closing below this level will lead to lower levels as a short-term support level would have been violated.

Traders may take short-term positions on the short sales side and expect a one per cent drop in prices from present levels.

Tata Engineering is moving in a downward sloping channel and is likely to test it's channel top at Rs 161 levels in the short term.

Traders are advised to take a bull positions with a tight stop-loss.

Traders would do well to take positions on high beta counters to outperform the market in the short term.

Vijay Bhambwani

CEO, BSPLindia.com

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

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