Nifty likely to witness range of 5275-5130: Bhambwani

Technical Analyst, Vijay Bhambwani:

The markets opened with a big gap down and ended the session with widespread losses as the bulls failed to keep the Nifty above the 5400 bullish pivot throughout the session, as the US downgrade imbroglio hit sentiments. The benchmark indices ended with approx 2 % losses at close. The traded volumes were higher than the previous session which is a negative indicator for a bearish weekend session. The market breadth was negative as the BSE & NSE combined advance decline ratio was 733 : 3688. The capitalisation of the breadth was negative as the commensurate figures were Rs 3530 Crs : Rs 14083 Crs. The NSE shed Rs 130287 Crs in market capitalisation.
The indices have closed in the upper end of the intraday range as the bulls were able to offer feeble support at lower levels during the session, aided by bear covering. The intraday range specified for the Nifty between the 5375 / 5210 overshot as the Nifty tested the 5116 levels, thereby exceeding our intraday levels on the downside.
The coming session is likely to witness resistance at the 5275 levels on advances. Support is likely at the 5130 levels below which the 5050 maybe seen. The wide range is due to the high base effect of Fridays range. The bullish pivot for the session is likely at the 5200 levels above which the Nifty must stay throughout the session. The bearish pivot is at the 5150 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 doji candle, which indicates resistance by the bulls to further declines below the 5100 area. Follow up buying above the 5200 levels (bullish pivot for the day) with higher volumes and open interest as a strict pre-requisite will see a possible buildup of some gains, though sustain ability in the near term is suspect as overhead supply can spike gains. It will take little selling to derail any attempted upthrust and therefore bulls are advised to desist from leveraged aggressive buying. The downward sloping trendline is now an unimpeachable resistance for the bulls to overcome.  The Nifty (spot) must stay above the 5200 levels sustainably with volumes and open interest expansion to rally intraday on Monday. On the flip side, sustaining below the 5150 levels may trigger a fresh bout of declines.
The market internals indicate a higher turnover due to the selling. The number of trades were higher and the average ticket size per trade was higher, which indicates mounting selling pressure. 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 will have to keep the Nifty above the 5200 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.