Bulls set to rule Nifty, sans signs of weakness

THE Indian market is jumping with joy to new highs. The Benchmark indices run over another one per cent. The Nifty rallied to a new lifetime high and registered a fresh breakout. It gained by 142.10 points and closed at 14,789.95. Barring Realty and FMCG, all the sectoral indices closed higher. Pharma and the PSU banks rallied the most with 2.79 per cent and 2.61 per cent gains. Banknifty, Metal, FinNifty and the Auto indices advanced by over one per cent.

The broader indices Nifty Midcap-100 and Smallcap-100 also rose by 1.45 per cent and 1.22 per cent. The overall market breadth is positive as 1165 advances and 703 declines. 126 stocks hit a new 52 week high, and only four stocks are at a new one year low. The Nifty registered a fresh breakout on Wednesday by closing above the prior high. It rallied 9 per cent in the last three days. It formed a hammer candlestick pattern at a new high. In fact, it is almost a doji as it closed just above the opening level. The hammer and the last hour selling pressure indicated the profit booking at the higher levels. As the market hits new highs, there is no weakness visible. Today's lower shadow shows the buying interest in every dip. The upper Bollinger band shows that the upside potential is still present. The upper Bollinger band is at 14,932. As long as the Nifty sustains above the breakout level or previous high of 14,754, the probability of moving towards near 15,000 levels are high.

Only in case of a close below the previous day low will lead into a consolidation. The current candle shows that the market participants are indecisive about aggressive buying. After breaching 50DMA just for one day, it moved 6.53 per cent above to it. The Nifty again moved 27 per cent above the 200DMA.

On a 75 minute chart, the Nifty formed a megaphone or a broadening formation. It faced a trend line resistance at today's high. A move above 14,860 is positive and will negate the broadening formation's implications. The derivative volume is lower than the last two days, and the open interest does not show any unwinding. The Put-Call Ratio (PCR) is on the higher side at 1.61. These minor technical factors may affect the market movement on Thursday, as weekly expiry is also on the cards. Shorts squeeze and profit booking at a higher level may increase the volatility.

(The author is a financial journalist, technical analyst, trainer, family fund manager)