Avoid fresh short positions
Normally, a low-volume rise or a breakout is not trustworthy
image for illustrative purpose
On the first day of the new financial year, the benchmark index Nifty made a new lifetime high. The Nifty gained by 135.10 points or 0.61 per cent and closed at 22,462. The Nifty Auto and FMCG indices were losers today, with 0.16 per cent and 0.11 per cent, respectively. Nifty Media is the top gainer with 4.69 per cent, followed by Realty with 4.36 per cent. The Metal, Small-cap indices gained by 3.70 per cent and 3.26 per cent. The PSE and CPSE indices gained. 1.87 per cent each. All other indices gained by 0.41 per cent to 1.75 per cent. The India VIX is sharply lower by 5.84 per cent to 12.08.
The market breadth is positive as 2,314 advances and 338 declines. About 114 stocks hit a new 52-week high, and 408 stocks traded in the upper circuit. HDFC Bank, Tata Steel, Indus Tower, and ICICI Bank were the top trading counters today in terms of value.
After the first hour of trading, a mild profit booking emerged. Finally, it closed just points above the opening level. It formed a Shooting Star candle. The volumes were lowest after February 28. The most important technical development was that the RSI has shifted its range into the strong bullish zone, above 60. The MACD has given a fresh, bullish signal by crossing above the signal line. These two are most positive for a bullish set-up. The only concern is volume. The Nifty also failed to register a breakout above the previous high along with the major indicators. It declined by 70 points from the day’s high.
On an hourly chart, the RSI crawled to the 64 level, and the MACD is about to give a bearish signal from an extreme level. Other than these concerns, the set-up is extremely bullish. Normally, a low-volume rise or a breakout is not trustworthy. The index future is trading 149 points premium to the spot. We may see premium erosion in the 2-3 trading sessions. As long as the Nifty trades above 22,300 points, be with a positive bias and avoid fresh short positions. If the index declines below the 20DMA of 22,201 points, it can test the 50DMA of 21,972 points. On the upside, the 22,621 may act as immediate resistance.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
