The Sensex fell by 32 points on Monday; but despite that the index has not broken down through the uptrend support line. As the market opens on Wednesday after a holiday on Tuesday, the index has the potential to lose another 50 points. But on the contrary the beginning of the new week at NSE could do the trick of keeping the Sensex up, supported on the trend line. The market opened with the Sensex at 4051.58, which was 67 points lower than the previous close of 4118.26. The opening was 1.5 per cent down and pretty weak. But after the initial opening, values picked up pushing the Sensex to a high of 4133.72. The opening level was the low for the day. The market closed with the Sensex at 4085.93. The support on the trend line was at 4050. And it was interesting to see the Sensex bounce off at 4051.58. It should also be of some satisfaction for the marketmen that the index closed at 4095.93, which was 45 points above the support point.
The 7-day exponential moving average is at 4095.99 and could cause someanxiety. The Sensex has closed 10 points lower. But one could take comfort that the 12 days average is at 4047.92. The market has closed well above this reference.
How will the market behave on Wednesday? To find an answer we need to consider a few releavant issues. Many operators had been trapped on Friday at the BSE. They had realised to their shock that BOLT was open and continued to work after many had downed their terminals. The extended period gave opportunity to a select few to square their outstandings further, pushing values down steeply. These trapped operators paid a very high badla rate. They had no choice but to square, alongside NSE operators. This was necessary to prevent adding insult to injury. If the market went down further during the new BSE week, the combined burden of badla and further erosion in prices would be a crippling blow. It made sense to breathe hard and take your loss, now.
One has to build that in Monday's market behaviour. And despite factoring in that you still find theSensex supported on the trend line. At the end of the day, you find that many pivotals have receded to what could be quite close to support levels. The Sensex could move down by another 50-70 points. On the contrary, with only that much space to move down (unless there is a trend reversal per se), there is a good chance that traders would support the prices once more. That could only be the first step. What happens thereafter is best left to be interpreted later!
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
