The upward thrust initiated on Monday was sustained on Tuesday with the Sensex opening 12 points higher at 4263. It moved up by 38 points to post an intra-day high of 4301. After recording an intra-day low of 4247, the market closed at 4300, close to the day's high. It is significant that the day's high at 4301 was much higher than 4133.24, which was the low on the previous day. The day's opening, high, low and close were all above the previous day's figures. What's more, the opening was 12 points above the previous day's close, which in technical parlance is called `opening with a gap'. This is a strong bullish signal. The other strong bullish signal for the day was that the index closed almost at the high of the day.

Coming to the range of movement for the day, the 54 points range between the high and low falls in the typical 60 points range, marked earlier before the break-out was triggered. The break out had materialised at the fag-end of a triangular flag formation. The climb of the Sensex that has now begun is after a `consolidating' type of flag. It has not come after a corrective short wave. To this extent, the momentum of the present thrust would be of great interest. In as much as stochaistics is in the overbought region, it would normally not favour a flare-up kind of rush to 4500 region. The climb could very well be a slow one.

And as one looks into the individual charts comprising the Sensex, one can see how a heavy weight like SAIL has contributed to the index. SAIL was waiting to be led up. On the other hand, Monday's flare up was restricted to select shares. Many others moved up more on market sentiment, rather than technical momentum. In fact, the lack of momentum is what limited the per centage gain in these scrips. Indirectly, this lack of momentum itself arises from market valuation. The market valuations appeared close to optimum.

That being the case, one would now have to watch how fast can the Sensex move upwards. Without going into a detailed analysis of scripwise potential, we feel an immediate flare up to 4500 is not indicated. What is indicated is a slow gait.

We should also keep ourselves open to the formation of another flag, rather than that of a head and shoulder formation. Another flag would mean another horizontal and consolidating travel, happening at a little higher than 4300. The next few days will reveal how the Sensex will amble.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.