Nifty likely to witness range of 5175-5025: Bhambwani

Technical Analyst, Vijay Bhambwani:

The markets opened with a gap down yet again and ended the session with widespread losses as the bulls failed to keep the Nifty above the 5200 bullish pivot throughout the session, as the US downgrade continued to weigh on sentiments. The benchmark indices ended with approx 1.8 % losses at close. The traded volumes were lower than the previous session which is a routine indicator for a bearish session. The market breadth was negative as the BSE & NSE combined advance decline ratio was 922 : 3434. The capitalisation of the breadth was negative as the commensurate figures were Rs 2829 Crs : Rs 13567 Crs. The NSE shed Rs 95359 Crs in market capitalisation.

The indices have closed in the lower end of the intraday range as the bulls were unable to offer support at lower levels during the session, barring some bear covering. The intraday range specified for the Nifty between the 5275 / 5050 held as the Nifty bounced from the 5054 levels, thereby validating our intraday levels.

The coming session is likely to witness resistance at the 5175 levels on advances. Support is likely at the 5025 levels below which the 4875 maybe seen. The wide range is due to the high base effect of Mondays range. The bullish pivot for the session is likely at the 5150 levels above which the Nifty must stay throughout the session. The bearish pivot is at the 5100 levels below which declines 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 big gap down candle, which was filled intraday but the 5100 - 5110 area will now become the point of conflict between bulls and bears. As advocated yesterday, It took little selling to derail any attempted upthrust and therefore bulls are on the ropes. The downward sloping trendline is now an impregnable resistance for the bulls to overcome.  The Nifty (spot) must stay above the 5150 levels sustainably with volumes and open interest expansion to rally intraday on Tuesday. On the flip side, sustaining below the 5100 levels may trigger a fresh bout of declines.

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

The outlook for the markets on Tuesday is that of caution as the bulls will have to keep the Nifty above the 5150 levels sustain ably. Overhead supply will be significant and the bulls have a difficult task at hand.

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.

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