Market Technicals: OBOMA At Work Now...

Everyone is talking about the farmers’ protest but no one seems to have picked up the protest that has been launched about a week ago by the ‘Organisation of Bears Of the Market’, or OBOMA as I like to call it. Now, these are an oppressed class—although a lot more elite than the farmers, one must admit—in our country. They have been a beleaguered lot for the past many months and claim that some of their members have been almost driven to suicide! Claiming their situation to be quite dire, they have now assembled in large numbers outside the Jantar Mantar in Delhi. They probably figured that they might as well occupy that prominent protest spot before the farmers come and squat there.

I am told that the Home Minister was quite startled when his chief aide told him that a delegation from OBOMA had come to meet him. “Why is the former U.S. president sending a delegation, asked the HM? Is he also becoming pro-farmer? Is there some connect with the Canadians? What, what? C’mon man, tell me, is the former President also likely to come?”

These were a barrage of questions that came from the HM. His aide hurried to assure him that he had misunderstood and that it was OBOMA, a bunch of bears, and had nothing to do with former President Obama.

The HM was even more perplexed. “Bears? He said bewildered. Are the farmers using bears these days instead of bullocks?

You have to forgive the HM, poor bloke. He is so much in the thick of this non-farmer protest thingy that the former stockbroker is now imagining new non-farmers coming out of every woodwork! Finally, once he understood, he told his aide that he was far too busy right now and he can see them later – which actually meant never. The aide fobbed the delegation off, probably told them to watch The Scam and see how those guys managed it last time! Or some such.

But the OBOMA gang were overjoyed on Monday when the market took a solid knock. Many of them thought that it was owing to their visit to Delhi and their near-meeting with the HM. Wow, said one of them, Motabhai sure knows how to fix things!

The truth is, when you desperately want something to happen, your mind can imagine anything, even to concoct something like Motabhai-action.

And on that day, they gave it as good as they had got earlier. But all, so far, for one day only, alas!

The bulls were shaken of course and probably may have thrown in the towel, had not the bears run out of ammo within a day. To the dismay of the OBOMA gang, their brethren did not come forward in the numbers they had expected on the three sessions following that super down day of Monday. Disappointed, they seem to have retreated a bit by the end of the week, perhaps to plan their strategy across the long weekend. Since most of them were non-Christians (I believe), matters like a holiday on Friday may not have mattered. Diwali or Ram Navami or something like that may have gummed the works as most of the younger bears would have run away to Goa or elsewhere for a holiday. Maybe.

In the meanwhile, the Bulls got slightly charged up. Remember the Alamo…er, Nov 25th, they shouted to their flocks. We routed them back then and we will do it again, comrades. Full teji ahead, guys, board the train Now!

And there it rests as of now. Finally, the bears made an appearance, or did they really? Was it yet another case, as I had written earlier, of all recent bulls panicking and dumping their goods, the limited-capital guys being forced out of their positions by margin deficiency? Perhaps it was just the same old domino of one set of sellers just tripping another in a limit-loop that is now becoming all too familiar in the markets? There was hardly any concrete news and no big selling data – FPIs were net sellers of only Rs 330 crore that day. However, a whole lot of positions got shed as the put-call ratio fell by 35%, from 1.65 to 1.12.

Well, we will never know, will we? I am sure there are some who do know but they are not going to let us into that loop, are they? So for all of us, we have to rely upon what I call FTPA – Follow Through Price Action. This is one key price action indicator that sets up the situation rather clearly for us to read. Here is how I see it.

Market trading is like warfare – it is all about ground lost and ground regained. The bears launched an attack on Monday but by Thursday, the bulls had reclaimed the territory lost.

Now comes the all-important FTPA. Can the bulls follow-through on what they have done so far? In that lies the crux. If they can hoist the market to levels higher, then they would have won the day, yet again. But if they fail here, then the OBOMA committee will become active! FTPA next week, is going to be the way to look at the market. Note that I said next week and not Monday. No one gives up so quickly in a battle and the same applies here too.

Let’s see if we can get some help from the sector indices. Breadth is an important element in the fight. The news on that front I am afraid is not so good. While the NSE 500 and Nifty Junior and a few others like the IT Index and Pharma Index did manage to do well, most others were seen struggling to claw back the ground lost. Checking for the same event on the Nifty components I find the data to be almost even – 28 have not made it versus 22 that have. So that still leaves us a bit on the sidelines wondering who is going to blink first. For sure, the OBOMA committee is reading that data and will be formulating plans for keeping those under some sort of check so that they don’t chip in with gains to aid the main indices.

In last weekend’s article, I spoke about two value zones of support – one for the near term (for traders) and one a bit more distant (for the longer pull chappies). Well, the first one got compromised completely but the second one has held.

That now makes the second zone of Nifty support at 13,150-13,200 as an important support level and stop-loss area for the week ahead.

One of the things to really watch out for is if the indices are unable to crack the top. If that happens, then know that the OBOMA committee is about to make another go at it in the coming week. But if the market easily surpasses higher then membership of the bear committee shall dwindle once again because their repeated attempts are not working and the attractions of the bearish side may start to pale.

Let’s leave it there for now and await the actual action.

CK Narayan is an expert in technical analysis; founder of Growth Avenues, Chartadvise and NeoTrader; and chief investment officer of Plus Delta Portfolios.

The views expressed here are those of the author, and do not necessarily represent the views of BloombergQuint or its editorial team.