Charts signal exhaustion as indices at life-time highs
Volumes were below the average for the last 4 sessions; The current swing is 13 days old; The index has not closed below the prior low in this swing; It is also the longest swing in recent times
image for illustrative purpose
The equity frontline indices closed at another new high. NSE Nifty gained by 111.05 points or 0.49 per cent and closed at 22,753.80 points. The FMCG, Metal and Energy indices led Wednesday’s rally with over one per cent gains. The Media index is the top gainer with 1.80 per cent. The PSU Bank index gained by 1.53 per cent. The PSE and CPSE indices gained by 1.44 per cent and 1.02 per cent, respectively. The Nifty Pharma and Auto indices closed with moderate declines. All other sector indices gained 0.06 to 0.75 per cent. The market breadth is positive as 1,397 advances and 1,200 declines. About 127 stocks hit a new 52-week high, and 81 stocks traded in the upper circuit. Vedanta, HDFC Bank, Reliance and ICICI Bank were the top trading counters on Wednesday, in terms of value.
The Nifty retraced above the prior day’s opening high and hit a new lifetime high at 22,775.70. It closed strongly at the week’s high. After many days, the rise with higher volumes in the last four days has increased the conviction on the bullish bias. The index also closed at the rising trendline resistance, drawn by connecting the previous swing highs.
Importantly, the volumes were below the average for the last four days. The RSI closed at the highest level after March 7. Even the MACD also shows an increased bullish momentum. On a derivatives expiry it traded in just 102 points range. The current swing is 13 days old. The index has not closed below the prior low in this swing. It is also the longest swing in recent times. As the index formed a small body candle, it again showed exhaustion at the lifetime highs. It has shown exhaustion signals several times in the recent past. But failed to retrace, there have been volatile days since the 16th January high. As the index is not showing any weakness in the price, it is better to be with the trend. In any case, a decisive close below the prior day’s low will be the first sign of reversal. Stay with cautiously optimistic.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
