Indicators Signal Short-Term Positive Bias

The domestic equity market rejoiced about the US election outcome. The world markets feel Trump’s win is positive for equities. The benchmark index Nifty gained by gained by 296.55 points or 1.22 per cent and closed at 25592. All the sectoral indices ended positive. The Nifty IT is the top gainer with 3.99 per cent. The Realty, Oil and Gas indices are up by over 2.54 per cent. The PSE, Midcap, Smallcap and Consumer Durable indices advanced by over two per cent. A majority of indices registered over one per cent gain. The India VIX is down by 7.78 per cent to 14.86. The market breadth is extremely positive as 2213 advances and 620 declines. About 93 stocks hit a new 52-week high, and 181 stocks traded in the upper circuit. Waree Engineers, Dixon, Reliance and HDFC Bank were the top trading counters in terms of value.

The Nifty closed at the crucial resistance. It registered a follow-through day with above-average volume. Infosys and TCS alone contributed over 100 points to the index today. The index opened above the prior day’s high and closed decisively above the key resistance of 8EMA. Now, the immediate resistance and target is 20DMA of 25567. The index almost tests this resistance as we expected yesterday. As stated, the index has given early signs of a pause in the fall and bounced. Now, it is important to continue the rally towards the 50DMA of 25050.

It is also a 50 per cent retracement level of the current fall. Normally, all counter rallies and pullbacks end at 50 per cent retracement levels. In any case, if the index fails to continue the rally and closes below session’s low of 24204, it will be negative. As long as session’s low is protected, stay positive.

The MACD is about to give a bullish signal. The RSI entered into the neutral zone from the bearish zone. The market breadth, volumes and broader participation are signs of short-term positives. Avoid taking short positions. On the long side, the IT sector has improved relative strength and momentum. The sector may outperform other sectors in the near term.

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