Equity rally sans strength

With the wavering moves of the last week, the equities closed higher with the support of IT stocks. NSE Nifty closed at a new high of 19,564.50 with 150.75 points or 0.78 per cent gain. The Nifty IT index once again registered a gain of 4.45 per cent, and the Metal index is up by 1.41 per cent. The Midcap-100 and Smallcap-100 indices were up by 1.15 per cent and 1.42 per cent, respectively. All sectoral indices closed with decent gains. The market breadth is extremely positive, as the advance-decline ratio is at 2.35. About 133 stocks hit a new 52-week high, and 62 stocks traded in the upper circuit. TCS, HDFC Bank, and Reliance were the top trading counters today in terms of value.

The Nifty closed at a new high with broader market participation. It closed above the previous week’s high and erased the weakness. It traded in Friday’s range for the last four days, where it showed hesitation and formed a series of bearish and indecisive candles. The rally extended for three weeks after April when it began the trend. The negative divergence in RSI still persists. The RSI (72.51) is in the bullish zone, near the over-bought condition. During the last two days, the Nifty did not sustain at the opening level, forming negative bars. But it did not close below the previous day’s low. It sustained above the monthly VWAP. Today’s new high is with a lesser volume and low VIX. The India VIX is the lowest level after December 2019. At the same time, the Mansfield relative strength indicator does not have any strength in the trend compared to the broader market. As the index registered a fresh breakout, all the weaker signs vanished. Now, the supports moved higher to the 19,327 points, which is the weekly low. The 8EMA support is at 19393. Unless these supports are broken, we can’t be bearish on the market. As all the bearish patterns getting failed repeatedly, it is better to stay cautiously optimistic.

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