Nifty likely to witness range of 5580-5450: Bhambwani

Technical Analyst, Vijay Bhambwani:

The markets opened on an optimistic note and ended the session with sizable gains as the bulls managed to keep the Nifty above it's bullish pivot for most part of the session. The benchmark indices ended with approx 3.5 % gains at close. The traded volumes were lower as compared to the previous session, which is a negative indicator for a bullish day. The market breadth was positive as the BSE & NSE combined advance decline ratio was 3333 : 987. The capitalisation of the breadth was positive as the BSE & NSE combined figures were Rs 14840 Crs : Rs 1815 Crs. The NSE gained Rs 186528 Crs in market capitalisation.

The indices have closed in the upper end of the intraday range as the bulls were able to support the markets at higher levels. The intraday range advocated for the Nifty between the 5425 / 5225 was overcome as the Nifty tested the 5533 levels - thereby exceeding our intraday wave count employed on the upside.

The coming session is likely to witness a resistance at 5580 on advances above which the 5625 maybe likely. Support is likely at the 5450 below which the 5425 levels maybe seen. The wide range is due to the high base effect of Tuesday's intraday range. The bullish pivot for the session is likely at the 5475 levels above which the Nifty must stay throughout the session. The bearish pivot is at the 5430 levels below which fresh falls may occur. Traders must watch these levels for signs of trend determination in the coming session.

The daily candle chart of the Nifty shows a large bullish candle, with a tiny upper wick indicating a lack of resistance on advances. The bearishness anticipated was overcome due to the frenzy of short covering on rallies (open interest is down by 8 lac shares on the Nifty current month futures) and the poor volumes seem to point towards a lack of participation on advances. The possibility of a profit taking session after a big bang upmove should be kept in mind as has been the empirical evidence. The bulls must keep the index above the bullish pivot of 5475 consistently on Thursday to extend the upmove intraday.

The market internals indicate a lower turnover due to the lack of buying conviction at higher levels. The number of trades were lower and the average ticket size per trade was lower, indicating a poor retail participation. The capitalisation of the market was higher in line with a bullish session. The put call ratios indicate the bears enhancing their shorts on advances.

The outlook for the markets today is that of cautious optimism as the bulls will have to keep the Nifty above the 5375 levels sustainably.

The analyst is a Mumbai based author of India's first commodity trading guide book - "A Traders Guide to Indian Commodity Markets" and invites feedback at vijay@BSPLindia.com.

Disclosure: The analyst has no exposure to the scrips recommended above.