A move above 16,700 will be positive

With the expiry trades, the benchmark index Nifty registered a new high close on Tuesday. It gained 128.15 points and settled at 16,624.60 points. Barring IT and FMCG, all the sectoral indices were, due to short covering their respective stocks. The IT and FMCG declined by 0.67 per cent and 0.24 per cent, respectively. The Metal index sharply recovered by 2.90 per cent. A majority of the sectoral indices closed with over 1.5 per cent gains. The Smallcap-100 index was up by 2 per cent and Midcap-100 advanced by 1.43 per cent.

The market breadth is positive as 1499 advances and 444 declines. About 39 stocks hit a new 52 week high, and 134 stocks traded in the lower circuit and 131 stocks in the upper circuit.

The Nifty closed above the previous day high and registered a new high closing. It formed a Hanging Man candle. As the expiry trades gains momentum, the short-covering rollovers are influencing the market direction. The rollovers are still not attractive as they are below the average. The Nifty futures volume also recorded below the average. The PCR rose to 1.3, which indicates more volatility in the market. As the Friday gap is filled and closed higher by a higher high and higher low candles, the market continues to be in positive territory. The momentum is flat for the last two days. The MACD histogram is moving lower, and the price is moving higher. This divergence is because of expiry trades are in. The next two days of trading are the key in the market. A move above 16,700 will be positive. A breakout out of a channel will test the 17,260 levels. Only in the case of closing below 16,535 points is negative for the market. The best strategy for now is, be with the low position size.

(The author is financial journalist, technical analyst, family fund manager)