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TECHNICAL ANALYSIS

Volatile market

K. Premkumar

THE index opened with a bull gap of about 22 points on Tuesday. Initially it gained about 19 points from the open of the day to mark the intra-day high. Later, it lost about 46 points from the day's high.

Towards the end of the day, the index gained about 24 points from the day's low to close around the day's open. Ultimately it gained about 19 points from the previous last-traded value.

The trend of the market continued to be bearish for the 13th calendar day on Tuesday. Both the bullish and the neutral levels of the index are placed about 65 points away from the day's last-traded value. A very strong bull move prevailing on Wednesday h as the potential to reverse the current downtrend.

On Tuesday the sentiment of the market became mildly bullish in favour of the bulls. If the bulls dominate the market on Wednesday the sentiment is likely to remain the same. If the bears were to dominate, the sentiment is likely to become neutral.

Recommendation Follow-up: This section closely tracks a maximum of ten securities at a time and assists traders in exiting the logged-in positions. The idea behind tracking a limited number of securities from the available 20 opportunities is to show how the selection process is being done using the `best to trade' column from the Top 20 table.

As the stations fall vacant from the Top 10 tables, from among the counters triggering the signal on that day, the `best to trade' rankers find their way to fill the vacant stations. The selection function is critical in a real life-trading scenario give n the limited capital and risk-taking capabilities of the traders.

The downtrends in PentaMedia Graphics and ACC exited the Top 10 list on Tuesday. The vacant stations were occupied by the uptrends in Silverline and Rolta.

At present there are four downtrend counters and six uptrend counters logged into the Top 10 list. All the ten counters are likely to remain safe on Wednesday irrespective of the domination by the bulls or the bears in the market.

Day's Recommendation: It is better to trade in securities which see a good volume of trading and decent volatility. The basic idea behind this is that the traders should be able to enter and exit at the intended price levels with very little slippage the reby keeping the cost of trading to bare minimum.

Based on an index computed using the trading volume, number of transactions and price movement, the top 20 scrips have been chosen and ranked from among all the scrips traded on NSE. This list is highly dynamic and keeps pace with the market activity. Th e Top 20 list remains the same.

Buying opportunities for the bulls are unlikely to exist on Wednesday. Selling opportunity for the bears is likely to exist in a lone counter - Reliance Capital.

This counter is in the buy position at present. If the bears were to dominate the market on Wednesday this counter is likely to trigger its sell level.

This is likely to happen since the last-traded value of this counter is close to its sell level.

(Note: All price levels refer to the absolute value of the shares traded on the NSE. There is risk of loss in trading.)

The author is a Chennai-based technical analyst and fund management consultant.