Better to stay neutral
In any case, NSE Nifty closes above 17024, the next level resistance is 61.8% retracement level of17170, which is a probable target in the near term
image for illustrative purpose
The stock market recovered entire Monday loss in the last two sessions. The Nifty closed positive for the second successive day. Today it gained by 184.6 points or 1.1 per cent and settled at 16955.45. The Bank Nifty also gained by 1.22 per cent. The Nifty Realty and Smallcap-100 indices ended with 2.95 per cent and 2.15 per cent, respectively. The Pharma, Auto, Metal and the Midcap-100 index advanced by over 1.55 per cent. The only CPSE index is down by 0.12 per cent. The India VIX is down by 5.46 per cent. The market breadth is positive as 1545 advances and 487 declines. About 66 stocks hit a new 52-week high, and 181 stocks traded in the upper circuit.
The Nifty filled the Monday gap and closed at the day's high point. The previous day's Doji candle got the bullish confirmation as the index closed above it. It also closed above the 5EMA. The last two days of counter-trend failed to give the strong bullish signals, and the bounce is because of short covering. The consecutive days of positive closings did not attract the volumes, and the open shows that the rally was because of huge short covering. Today the Nifty future volume is much less than the previous day and below the average. As we expected earlier, the bounce was crossed 38.2 per cent retracement level (16879), and the next level of resistance is at 17024, which is a 50 per cent retracement level. The 8EMA resistance is at 17009. This 17009-024 zone of resistance will play a crucial role on a weekly expiry day.
There is a hidden divergence visible in RSI, and it also reached to channel resistance line. In any case, the Nifty closes above 17024, the next level resistance is 61.8 per cent retracement level of17170, which is a probable target in the near term. Beyond this level, we cannot forecast at the current level. But a move below 16838 will be negative for the index. A close below this level, the index will resume the downward move. Even after the last two days of positiveness, it is better to have a light position or stay neutral.
(The author is financial journalist,technical analyst, family fund manager)
