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ShareThe markets have witnessed a buoyancy that has taken many a retail trader by surprise as the rally has been accompanied by lower volumes, has come at a time when retail participation is truncated due to the festive season and the turnover is lower.
While the upthrust has come about in the face of scepticism, bulls are known to overcome walls of worry to scale new heights.The 4800 level on the Nifty is a crucial level as it is the 0.618 retracement of the entire decline witnessed in the calendar year 2008.
As long as the Nifty manages to stay above this threshold (give or take some leeway), the bulls are likely to remain in charge, closing levels, especially weekly closings are more critical than intra-day penetrations.
Also noteworthy is the fact that the Nifty has broken out of an ascending triangle formation which has bullish implications.The support for this pattern also coincide roughly with the 4800 levels, which makes this threshold all the more important. The upside potential is up to the 5250 levels in the coming week/s as the bear covering is likely to cause a upthrust.
The only negatives will be the long weekend and the overseas cues which maybe a wild card. The bears have been steadily pushed into a corner as the market wide put call ratio over the last few days indicates.
The market-wide put-call ratio is given in the table here.Clearly, the bears have been on the ropes and are squaring up their positions under co-ercion of higher closing prices.
The upthrust is likely to falter as and when the bears have been squeezed significantly and not many shorts are left to square up.
I feel that threshold maybe seen at the 0.35 - 0.40 levels on the market wide put call ratio.
Technically, the market is not yet oversold to the extent that the upthrust be doubted completely.There is headroom for some more upsides before the profit-taking pressure spikes the bulls. For traders who are nursing longs, the ideal course of action is to unwind in a staggered fashion near the 5125 and upwards.
For traders who missed the bus, aggressive big-ticket fresh longs are ruled out for now. The volatility that can hit the short-term traders makes the risk-reward ratio for fresh buys under optimal levels.
