Monthly RSI in extreme zone

The index negated all the bearish implications of last week’s Shooting Star candle. As the Shooting Star candle failed to get the confirmation for its bearish implications and closed at the high, there is no point in being with a bearish view

Positive Market Breadth :

•  1,831 advances
•  855 declines
•  RSI bounced back
•  163 stocks in upper circuit
•  India VIX is down by 2.93%
•  199 stocks hit a new 52-wk high

Equities sharply rallied to new highs. NSE Nifty closed at 24,834.85 points, with a gain of 428.75 points or 1.76 percent. The Nifty Health care index is the top gainer with 2.73 per cent. The Auto, Pharma, IT, an Infra indices gained by 2 per cent to 2.43 per cent. The FMCG, Bank Nifty, and Smallcap indices recorded less than one per cent gains. All other indices advanced by over one per cent to two per cent. The India VIX is down by 2.93 per cent to 12.24. The Market breadth is positive as 1,831 advances and just 855 declines. About 199 stocks hit a new 52-week high, and 163 stocks traded in the upper circuit. HDFC Bank, Tata Motors, ICICI Bank, and Axis Bank were the top trading counters on Friday, in terms of value.

The equities bounced with a vengeance and registered a new high close on daily and weekly timeframes. It rallied 786.95 points or 3.27 per cent from the Budget day low of 24,074 to 24,861. It negated all the bearish implications of last week’s Shooting Star candle. For the fourth straight day, the volumes were above the average, but less than the previous day. As we suspected, the strong bullish indicated the reversal and has become a reality. As the shooting star candle failed to get the confirmation for its bearish implications and closed at the high, there is no point in being with a bearish view.

The weekly volumes were highest after the June first week. The daily volume trend has also been increasing for the last month. The RSI took support at 60 and bounced, which is a positive factor for momentum. But the concern still remains as the monthly RSI is above 81, in an extreme zone. When the RSI reaches above levels, expect a correction in the medium term. But it needs a confirmation for reversal. The 20DMA acted as support for the four days. Only a close below this crucial average at 24412 will give early signals for reversal. Otherwise, ride the trend with strict risk management.

(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)