Indicators Signal Trend Reversal

The equities recorded a sharp rebound on renewed buying support. NSE Nifty gained by 219.60 points or 0.89 per cent and closed at 24,768.30 points. The FMCG led the market recovery by gaining 1.29 per cent. The Infra and Consumer Durables indices closed with over one per cent gain. The Services, IT, FinNifty, and Auto indices gained over 0.50 per cent. On the flip side, Metal and Media indices were the top losers, with 0.72 per cent and 0.59 per cent, respectively. The India VIX is down by 1.04 per cent to 13.05. The market breadth was negative as 1,572 declines and 1,222 advances. About 83 stocks hit a new 52-0week high, and 82 stocks traded in the upper circuit. Reliance, Bharti Airtel, ICICI Bank, HDFC Bank, and HAL are the top trading counters in terms of value.

The market surprised everyone on both sides of the trade. It repeated the last Thursday’s price action. The Nifty was down by 347 points in the opening session, but recovered all the way to close above last Thursday’s close. The Nifty recovered 611.50 points from the day’s low. The Bank Nifty recovered by 1240 points. The Nifty has taken support on the 20DMA and bounced. At one point in time, the index is below the 20DMA, as well as 50 DMA. Bharti Airtel, ITC, and Reliance led the sharp rally. This session’s important technical development is that the RSI has moved above 60 and entered the strong bullish zone. This RSI shift, along with a close at the 50 per cent retracement level of the prior fall, is a big positive sign. The volumes were above the previous day, and above average is another validation for the resumption of the uptrend.

The index closed above the 20-week average is a big positive. Now, as we forecast earlier, the index moved impulsively after five days of dull trading. Any prolonged tight range and indecisive move will result in this kind of impulse move. On the upside, the 61.8 per cent retracement level of 25,125 is the immediate target and resistance. Stay positive as long as it trades above this session’s low of 24,183 and the 20DMA of 24,213. Focus on the reversal stocks with relative strength stocks.

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