Better avoid short positions

NSE Nifty rallied further and closed above the previous all-time high. The benchmark index advanced by 55.30 points or 0.30 per cent and settled at 18,618.05. The FMCG and Metal indices were up by 1.87 per cent and 1.03 per cent. The Nifty Realty, Auto, and Infra indices were down by less than half a per cent. All other indices gained less than a per cent. The market breadth is negative as 1,053 declines and 845 advances. About 88 stocks hit a new 52-week high, and 78 stocks traded in the upper circuit. Reliance, ICICI Bank, and IRFC were the top trading counters on Tuesday.

The Nifty continued to rally and recorded another new all-time high. The interesting data points on Tuesday are that the volumes are much lower than the last three days, and the index and broader market breadh are negative. The Advance-Decline ratio is just 0.88. The index closed higher for the sixth straight session. The last hour's trading indicates that there could be some profit booking, as the Nifty formed an upper shadow candle looking like a shooting star. On a 15 minutes chart, it closed on the moving average ribbon. The Bank Nifty witnessed more profit booking than Nifty. It has formed a Shooting Star candle, and it failed close above the 61.8 per cent extension level for the fourth consecutive day. The outperformance of the Bank Nifty is almost flattened.

Still, there are no weaker signals for Nifty or Bank Nifty. But, a close below 18,678 means a possible reversal. For the last two days, the sector indices have been almost flat. The broader market picture is not as bright as benchmark indices. The Midcap-100 and Smallcap-100 indices declined on Tuesday. As suggested on Monday, it is better to keep booking partial profits. And it is not the time to take short positions.

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