Charts indicate caution alert
As the short-covering is in full swing, it is better to wait the first 15 minutes to gauge the trend. A decline below 20 DMA (17864) will be negative again
image for illustrative purpose
The domestic equity benchmark indices rallied on a negative economic data and negative broader market breadth. Today's rally is mainly due to short-covering. NSE Nifty rallied 157.40 points or 0.89 per cent and settled at 17929.15. The Metal, FMCG, PSU Bank, and IT indices gained by one per cent. The Bank Nifty and the FinNifty advanced by 0.90 per cent each. The Realty index is the top loser with 1.84 per cent. Nifty Auto declined by 0.36 per cent, and the Pharma and Media indices were down by 0.16 per cent each. The VIX is cooled off by just 1.66 per cent. The broader market breadth is negative as 1313 declines and 628 advances. About 151 stocks hit a new 52-week low, and 83 stocks traded in the lower circuit. Adani Enterprises, Reliance, and ICICI Bank were the top trading counter today in terms of value.
The Nifty closed above the last Thursday's high and formed a strong bullish bar. It also closed above the 20DMA decisively. Now, the Nifty is near the budget day's high of 17972. On a 0.89 per cent gaining day, the Nifty futures Open Interest declined by 4.28 per cent, and it indicates the bounce is because of short-covering. The Nifty futures is still below the last Thursday's high. ITC, Reliance, Adani twins, and some of the heavyweight banking stocks led the rally today.
The RSI finally moved above the 50 zone. The MACD histogram shows regained bullish momentum. If the index sustains above this 17920, The probability of breaking out of the Budget range is higher. The sloping channel resistance is placed at just above 18000. The breadth has to be improved from now to confirm the broader participation in the market recovery. The 17920-18000 is going to be very crucial resistance for now. Above this, the 50DMA resistance is placed at 18070. As the short-covering is in full swing, it is better to wait the first 15 minutes to gauge the trend. A decline below 20 DMA (17864) will be negative again. Stay cautious.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
