MACD histogram showing a flat momentum for now

With the positive global cues, the domestic stocks market opened with a huge gap-up and continued the bullish momentum. The Nifty closed at 16975.35, with 312.35 points or 1.87 per cent. All the sectoral indices closed with a positive bias.

The Bank Nifty, Auto, Metal, and the FinNifty are the top gainers with over two per cent gain. The Midcap-100 up by 2.01 per cent and the Smallcap-100 index advanced by 1.17 per cent. The India VIX is down by 9.77 per cent. The market breadth is positive as 1502 advances and 546 declines. About 34 stocks hit a new 52-week high, and 118 stocks traded in the upper circuit. PayTM, Reliance and Tata Motors are the top trading counters today.

The Nifty has cleared the channel resistance and closed at the 200DMA. The previous day's bearish candle failed to get the confirmation for a bearish reversal. At the same time, the 50DMA (17039) and the 200DMA (16988) will act as crucial resistance areas. Interestingly, in the same zone, the 50 per cent retracement level of prior fall from 18th January is placed at 17011. As the index is approaching multiple resistances at a similar level, we need to be cautious in this zone. Though the Nifty advanced by 312.35 points or 1.87 per cent, the day's trading range was limited to just 150 points. The volume is lower than the previous day and below the average volumes. On a 1.87 per cent, rising day, the Open Interest declined by 9.44 per cent, which indicates a massive short covering. On a 75-minute chart, the hidden negative divergence is still present in RSI, and the MACD histogram shows a flat momentum. The MACD line is absolutely flat. Price and indicator divergence needs confirmation for its implications. It only gives a caution. As long as the Nifty trades above the 16837, be with a positive bias. A close above 17040, the index will test 17328.

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