Avoid aggressive position build-up

Market Breadth

♦ 83 stocks hit a new 52-wk high

♦ 104 stocks traded in the upper circuit

♦ Hammer candle got confirmation for short-term pullback

♦ More sideways movements around 50DMA likely

NSE Nifty continued the recovery from Wednesday’s low. The Nifty is up by 109.65 points or 0.56 per cent and closed at 19,545.75 points. The Nifty Media index is the top gainer with 1.58 per cent, followed IT index with 0.99 per cent. The PSU Index declined by 0.51 per cent. Pharma and Metal indices are down by 0.30 per cent. A majority of sector indices gained over half a per cent including Auto, Infra, Bank Nifty and Consumer Durables. The remaining indices ended on a flat note. The VIX is down by 6.13 per cent and back to below 11 level. The broader market breadth is positive. About 83 stocks hit a new 52-week high and 104 stocks traded in the upper circuit. HDFC Bank, Zomato, and Reliance were the top trading counters today in terms of value.

As we expected yesterday’s late afternoon recovery continued. The Hammer candle got the confirmation for the short-term pullback. Now, the 19457 has become an important support for the market. On the upside, the 50DMA of 19,607 points is the immediate target and resistance. Above the Index can test the 20DMA, of 19,766 points, and the 50 per cent retracement level of the prior down move, which is at a similar level of 19,778pts. As the weekend is in place we may see more of sideways action around the 50DMA. As we suspected, the positive divergence in the RSI also helped the market recover from the low. Today, the recovery is led by IT and Auto stocks.

And all heavyweight stocks helped the market to recover. The Global markets closed positive, the sentiment was positive for now. But there are several concerns about the market direction. Next the earnings season will begin. Poor earnings will dampen the sentiment and impressive earnings growth will boost the rally to a new high. The VIX is below 11, is another warning sign for the market. Overall stay cautious on the weekend, and avoid the aggressive position size.

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