Expect a relief rally

A relief rally or a technical bounceback is expected tomorrow if global cues are not extremely bearish. The expectation is based on a technical development that has place on Monday.

Though the index saw a huge slide on opening, the lows made in the first 15 minutes were not tested during the day. The Nifty also posted a new intra-day high of 4355, making the intra-day trend-day bullish. This, according to Kamalesh Langote, director VFMDirect.com, indicates that the markets may open on a firm note.

Trading volumes were marginally up from Friday’s level while the advance-decline ratio strongly favoured bears. Immediate support is seen at 4,300 levels while strong resistance is seen at 4,404 levels. The 50-day moving average (Nifty 4,348) and 20 day-swing (Nifty 4,340) are placed nearby.

The 13-week moving average is at 4,310. This indicates there may not be a major pullback in the near future. The put/call ratio of the Nifty open interest moved down to 1.36 from 1.42 as 12.82 lakh open interest was added in call options against 7.65 lakh in put options.

The support and resistance on the basis of the Nifty put/call ratio is at 4,400 as the open interest is evenly placed at 4,400 levels. The support is seen at 4,300 levels as 15 per cent of the total put open interest is seen at 4,300 levels.

The intra-day volatility saw the players squaring there positions during the last hour of trading. If the markets open with a strong upward gap, the mid-day profit booking will pull down early gains. On Monday, the short covering was seen at lower levels, which pulled the Nifty above the psychological levels.

According to analysts, we are into a strong bear market if Nifty sustains below 4321-26 for two days. Below it, Nifty will be clearly in a mid-term bear phase. Investors have to be cautious as a heavy selloff is not ruled out.