Posted By : Kishore B.S
The markets last week remained in the positive territory due to the short covering in the FNO segment on account of the expiry week. This has brought into limelight the predicability of the technical indicators.
The technical indicators has been mostly right that they predict the direction of the markets most appropriately, as stated they were indicating highly oversold levels just a week prior to the expiry and that the bounce back was inevitable to the 5850 levels. This came out true and now they have overshot that levels to towards the 5950 levels.
At this juncture, it would be wise to note that typically the month of May have remained largely bearish months, where the indices have corrected on pretext of some news or the other. Except for the 2 times in the last 5 years, the bears have called the shot in month of May.
The charts too are indicating overbought levels, and hence the above statement, since at overbought levels, the markets need to consolidate or correct and based on the levels of the 5850 on the down side and the 5950 on the higher side the direction would be evident.
The most important event to watch out for this week would be the RBI policy scheduled on the Friday, which is been looked forward to eagerly and that might be the trigger either for the bulls or bears to give the direction for the month and till then volatility would be the order of the day and hence trading with cautiousness would be the most apt scenario……
(Inputs: Basket option Research bureau – Bangalore)