Nifty likely to witness resistance at 5525: Bhambwani

By Vijay L Bhambwani, CEO of BSPLindia.com

The markets opened on a bearish note and ended the session with losses as the bulls failed to keep the the Nifty above the 5550 bullish pivot throughout the day. The benchmark indices ended with approx 1.5 % losses at close. The traded volumes were lower as compared to the previous session, which is a routine indicator for a downtick session. The market breadth was negative as the BSE & NSE combined advance decline ratio was 1210 : 3022. The capitalisation of the breadth was negative as the commensurate figures were Rs 3555 crore : Rs 9886 crore. The NSE lost Rs 81204 crore 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 5590 / 5450 has held as the Nifty bounced from the 5444 levels - thereby validating our intraday wave count employed. The coming session is likely to witness a resistance at the 5525 levels on advances. Support is likely at the 5375 levels. The wide range is due to the high base effect of Thursdays intraday range. The bullish pivot for the session is likely at the 5520 levels above which the Nifty must stay throughout the session. The bearish pivot is at the 5480 levels below which declines may extend. Note how the pivot range continues to fall every day. Traders must watch these levels for signs of trend determination in the coming session.

The daily candle chart of the Nifty shows a larger bodied bearish candle, which has closed the open gaps left on the way up. While we had predicted that these gaps would be re-visited at a later date, the amplitude of the upmove made many a bullish trader sceptical of such a retracement. As advised by us yesterday, the bears returned with force below the 5530 levels. The downward sloping trendline will now be a maginot line for the bulls to overcome - failing which any upthrust remains on paper. The Nifty (spot) must stay above the 5520 levels sustainably with volumes and open interest expansion to rally intraday. On the flip side, sustaining below the 5480 levels may trigger a fresh bout of declines.

The market internals indicate a lower turnover due to the absence of buying support. The number of trades were lower and the average ticket size per trade was lower, which indicates a lack of buying support. The capitalisation of the market was lower in line with a bearish session. The put call ratios indicate the bears squaring their shorts on declines.

The outlook for the markets on Friday is that of caution as the bulls will have to keep the Nifty above the 5520 levels sustain ably to trigger an upmove. Being a weekend session, any initial short covering based buying momentum may see profit sales towards the end of the session.

Mandatory disclosure - the analyst has no exposure to the scrips recommended above.