Tech charts indicate counter-trend consolidation

Negative Market Breadth :

• 1,395 declines

• 1,258 advances

• Volumes fell lower

• 103 stocks in upper circuit

• 184 stocks hit a new 52-wk high

Led by Reliance, NSE Nifty surged to another new high. The Nifty closed at a new high at 23,868.80 points with 147.50 points or 0.62 per cent gain. The Energy and Oil and Gas indices are the top gainers with 1.41 per cent and 1.39 per cent, respectively. The Infra index also gained by 1.34 per cent. Bank Nifty is up by 0.50 per cent. Realty index is the top loser with 1.43 per cent. All other sector indices gained or lost by less than 0.50 per cent. India VIX declined by 1.87 per cent to 14.04. The breadth is negative for the second consecutive day as 1,395 declines, and 1,258 advances. About 184 stocks hit a new 52-week high and 103 stocks traded in the upper circuit. Vedanta, HDFC Bank, GRSE, and Reliance were the top trading counters in terms of value.

Nifty rallied for the third successive day and formed three white soldiers’ candles. In the last three days, It rallied by 540 points or 2.31 per cent. Normally, after a three-white soldiers pattern, the price enters into counter-trend consolidation. So, expect a negative day on Thursday. But, it all depends on the expiry day adjustments. The volumes were lower than the previous day. Except on June 21, the volume was below the average for the last 12 days. The Bollinger bands show there is still room for an upside move. Currently, the index is 2.97 per cent above the 20DMA and 5.02 per cent above the 50DMA. These distances show an extension of the trend. The Nifty is in uncharted territory, with strong bullish moves. Because of this, we can’t be short side, unless there is confirmation for reversal. On an hourly chart, the index is much above the moving average ribbon, which leads to a mean reversion.

On Wednesday, the index heavyweight Reliance Industries alone contributed 96.1 points with its 4.12 per cent rally. This bellwether stock closed at the new high with a long consolidation breakout. As the index rallied 2,608 points or 12.26 per cent from the Election results day low, it entered into a consolidation. The last three-day rally is a result of tight consolidation for two weeks. The Nifty also broke out of a rising channel. Post monthly derivatives expiry the index may experience another leg of consolidation. The Budget may be the trigger for the next leg of the trend. Stay cautiously optimistic for now.

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