Rising tops & bottoms point to uptrend

The week witnessed a positive trading pattern and the indices made a new 2010 high and closed at the highest weekly levels after the week ended January 25, 2008. That is a sign of optimism as the supporting evidence by way of market internals were also positive.

The weekly advance decline ratio on a combined BSE & NSE basis was 12745 : 8392. The capitalisation of the market breadth on a commensurate basis was negative as the figures were Rs 45734 crore : Rs 50729 crore. The capitalisation of the NSE was higher by Rs 1,03,493 crore as the buying support was fairly broad-based. In terms of sectoral action, the mid-cap segment was the strongest performer, followed by banking; technology was the loser during the week.

Overseas investors were net buyers to the extent of Rs 2,126.50 crore, and that had a positive impact on the rupee, which ended at the 44.28 levels vis-a-vis the US dollar (previous week 44.92 level).

The US and UK markets rallied to log new 2010 highs and the Dow Jones Industrial Average (DJIA) completed the chart pattern specified in my column on July 25, 2009 at the 11000 mark. The Nasdaq Composite index outperformed the DJIA and the domestic IT sector may remain firm, subject to Infosys’ results. Asian markets were led by the Hang Seng Index, followed by the Straits Times Index, whereas the Tokyo Nikkei 225 Index retraced some of its previous gains.

Technically, the markets are witnessing an uptrend as the rising tops and bottoms formation continues. The weekly range advocated last week between 5400 and 5175 has held as the Nifty retraced from the 5399.65 levels, thereby validating our wave count employed.

This week is likely to witness a range of 5475 on advances and 5225 on declines. As can be observed, the weekly projected ranges are rising, and bulls will need to offer ample buying support on declines if the upthrust is to sustain. Since the results season is upon the markets, the possibility of higher volatility cannot be ruled out.