Tech view: Exercise caution at 2,700-level

Spooked by Nortel Networks and weak overseas cues, the markets reversed the gains of the previous sessions. As I had advocated yesterday, the absence of any negative triggers was a critical pre-requisite for a rally. The market internals were expectedly negative as the combined exchange advance decline ratio was 958:2566. The capitalisation of the breadth on a commensurate basis was also negative as figures were Rs 798 crore: Rs 10,057 crore.

The indices have closed in the lower half of the intra-day range as the selling pressure was persistent till the end of the session. The weak internals added to the bearish picture and the oriental chart indicated a bearish “daki” pattern - completing weak outlook.

The intra-day range specified for Thursday — between the 2920 and 2755 — was violated on the downsides as the Nifty tested the 2702 levels before ending higher. The coming session is likely to witness a range of 2820 on advances and 2625 on declines. As long as the Nifty spot remains below the 2755 levels, the outlook will remain weak.

The outlook for the markets on Friday is that of caution as the Nifty has dived to the lowest level after December 5, 2008. That is a sign of weakness and if the bears manage to keep the Nifty below the 2,700 level for most part of the session, the bulls will be further compromised.