Caution alert for investors
Nifty closed above previous day’s high and tested the prior swing low; The volume was low on Tuesday
image for illustrative purpose
The stock market continued to recover for the second successive day. NSE Nifty gained by 117.70 points or 0.65 per cent and closed at 18132.30. The Metal index is the top gainer with 4.23 per cent. Nifty media and the PSU Bank indices up by 1.19 per cent and 1.29 per cent, respectively. The FMCG index is the only loser with 0.41 per cent. All other indices were closed with 0.1 per cent to 0.9 per cent gains.
VIX is further down by 4.03 per cent. The market breadth is positive as 1529 advances and 403 declines. About 16 stocks hit a new 52-week high, and 155 stocks traded in the upper circuit. Yes Bank, IOB, and Jindal Steel and Power were the top trading counters today in terms of value.
The Nifty closed above the previous day's high and tested the prior swing low. Even today, the volume was low. The shorts were covered and roll over to the next month. The Rollover percentage is the highest level at 44.54 per cent, which is higher than the three-month average. This shows that traders believe that the trend will continue.
The index retraced over 50 per cent of the previous three declines and closed near the 8EMA. Interestingly, on the monthly chart, the index is forming a bearish engulfing, and bearish belt hold candle. Several times in the past, it formed the bearish engulfing candles on the tops. To negate this pattern, the Nifty has to close above 18130 on the last trading session of the month, on this Friday. As stated yesterday, the index is still below the short-term moving averages.
The MACD line has not shown any positive momentum, though the histogram declined. On an hourly chart, it closed above the moving average ribbon, but the MACD line is below the zero line. For a bullish bias in the short-term, the hourly MACD line has to close above the zero line. The immediate resistance is at 18166 and 18219. As stated, the index needs to close above this to target 18440. For now, more rollovers and short-covering activity is going on. Still, trade is cautious.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
