Avoid aggressive long positions

The RBI’s decision to pause an interest rate hike boosted positive sentiments in the market. NSE Nifty rallied for the fifth successive session. It gained by 42.10 points or 0.24 per cent and closed at 17,599.15 points, just below the psychological level of 17,600 points. The Realty index is the top gainer with 2.84 per cent.

Nifty IT and FMCG were the losers, with 0.73 per cent and 0.54 per cent, respectively. The Bank Nifty is up by 0.10 per cent FinNifty is advanced by 0.49 per cent. All other sectoral indices advanced by 0.08 per cent to 0.90 per cent. The Advance-Decline ratio was positive at 2.01. About 57 stocks hit a fresh 52-week high, and 206 stocks traded in the upper circuit. HDFC Bank, ICICI Bank, and Reliance were the top trading counters for the second day in terms of value.

The Nifty has tested the sloping channel resistance line and formed a Shooting Star kind of candle. It opened with a flat to negative note. Soon after RBI’s neutral policy announcement, it rallied sharply to the day’s high. As the derivatives expiry was in place and a long weekend, traders preferred to book the profits at the resistance. Since the 28th March low, the Nifty rallied by 725 points or 4.29 per cent, an impulsive rally in the current downtrend. It is also the longest streak of positive days continuously. It closed above the 200DMA, 200EMA, and 50DMAs confluence for the second successive day. The volumes were lower than the previous day.

The Nifty also filled the 10th March gap area. The Nifty closed at the nearest resistance and 38.2 per cent retracement level (17615) of the downtrend. There are no weaker signs, but as the index met its measured target, it is better to be cautious. On positive to neutral policy day, the index closed almost flat. The RSI is still below the 60 zone, and the MACD is below the zero line.

The momentum is stronger for now. To continue the rally, the Nifty has to clear today’s high of 17,638 points. Above this level, the next target is at 18,000-18,114 zone. As stated earlier, the Nifty may form a right shoulder at this zone. The target can be achieved in the next two weeks’ time. Only in case of a decline below 17,500 points will it be negative. Stay with the existing positions with a trialling stop loss, and avoid aggressive fresh long positions.

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