18,703-888 level may act as support

Dalal Street’s all major indices hit new lifetime highs. BSE Sensex, NSE Nifty-50, Bank Nifty, and FinNifty close at a new all-time high. The broader market indices, NSE Nifty total market index and the Nifty-500 indices, also hit new highs. The Nifty is up by 154.70 points or 0.82 per cent and closed at 18,972.10 levels. The Bank Nifty and FinNifty gained by 0.47 per cent, and 0.54 per cent, respectively. Barring the Nifty Media index, which is down by 0.67 per cent, all other sectoral and thematic indices closed with decent gains. The Nifty Pharma is the top gainer with 1.46 per cent. The Energy and Infra indices gained by over one per cent. The market breadth is positive as the advance-decline ratio is at 1.14. Adani Enterprises, Adani Green, and HDFC Bank were the top trading counters on Wednesday in terms of value. About 121 stocks hit a new 52-week high, and 58 stocks traded in the upper circuit.

The most elusive breakout in the market was finally realised with a strong rally. The Nifty was up by two per cent or 365 points in just three days. This impulsive move with higher volume validates the breakout. The volumes were highest after 31st May. The Nifty has sustained above 18,888pts for at least another week, so we consider this 88 weeks price action as a Stage-1 base. As we expected earlier, the breakout’s immediate target is 19,115pts. The Nifty moved above 19000pts, too, during the day. By reaching new highs, the index erased all the implications of the bearish patterns. It has a routine for the market to form a bearish pattern to trap the bears.

In the last three months, all the bearish patterns in all time frames failed to get confirmation. Last week’s dark cloud failed to get the confirmation on the weekly chart. The 18,660pts and the 20DMA acted as strong supports. The index bounced from these supports. Though the index formed a lower low on Monday, it did not form a bearish candle. Now the 20-DMA support is at 18,704pts, and the 8EMA support is at 18,798pts. For an uptrend to continue, the bulls have to protect the 18,703-888 support zone. Only a close below the prior day’s low of 18,861pts is a sign of weakness and results in a failed breakout. Stay with the trend, and maintain a prior day low as a stop loss.

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