Nifty likely to witness range of 5550-5360: Bhambwani

Technical Analyst, Vijay Bhambwani:

The markets opened on an optimistic note and ended the session with sizable losses after five bullish sessions in a row. The benchmark indices ended with over 1.5 % losses at close. The traded volumes were higher as compared to the previous session, which is a negative indicator for a bearish session. The market breadth was negative as the BSE & NSE combined advance decline ratio was 1044 : 3262. The capitalisation of the breadth was negative as the BSE & NSE combined figures were Rs 5563 Crs : Rs 12303 Crs. The NSE shed Rs 102586 Crs in market capitalisation.

The indices have closed in the lower end of the intraday range as the bulls were unable to support the markets at higher levels. The intraday range advocated for the Nifty between the 5600 / 5485 was overcome on the downside as the Nifty tested the 5442 levels - thereby exceeding our intraday wave count employed on the downside. That the anticipated resistance at 5600 was tested exactly and the support was violated all in the same session indicates an hyper extension in the price elasticity which points towards higher volatility in the coming sessions.

The coming session is likely to witness a resistance at 5550 on advances. Support is likely at the 5360 levels. The wide range is due to the large base effect of Fridays range. The bullish pivot for the session is likely at the 5500 levels and the bearish pivot at the 5475 levels. Traders must watch these levels for signs of trend determination in the coming session.

The daily candle chart of the Nifty shows a large bodied bearish "daki" candle, which indicates the bears overwhelming the bulls after a brief period of bullishness. As per our concerns expressed throughout the upthrust, forceful volumes on bullish days were elusive, which resulted in a bigger collapse in a selloff session on Friday as the rally was relatively feeble. The bulls must keep the index above the bullish pivot of 5500 consistently on Monday to get a reprieve.

The market internals indicate a higher turnover due to selling pressure at higher levels. The number of trades were higher and the average ticket size per trade was higher, indicating a selling bias. The capitalisation of the market was lower in line with a bearish session. The put call ratios indicate the bears squaring up their shorts on declines.

The outlook for the markets today is that of caution as the bulls must hold the Nifty above the 5500 levels sustain ably to manage an upmove in the coming session.

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.