MACD shows strong momentum

What's Up

• 181 stocks hit a new 52-week high
• 118 stocks traded in the upper circuit.
• Wednesday’s high of 19,875.25 is strong resistance for now
• 20DMA flattened
• It took 15 days to erase previous sharp fall in just 6 sessions

The equities continued the rally and tested the prior swing high. NSE Nifty advanced by 89.75 points or 0.46 per cent and closed at 19,765.20 points. The Nifty IT index is the top gainer with 2.69 per cent. The Bank Nifty, FMCG, and Metal indices closed marginally lower. All other sectoral indices were up by 0.10 to 0.90 per cent. The India VIX is up by 4.60 per cent to 11.65. The market breadth is slightly positive as the advances were 1,299 and the declines were 1,169. About 181 stocks hit a new 52-week high, and 118 stocks traded in the upper circuit. The Baja Finance, HDFC Bank, and ICICI Bank were the top trading counters today in terms of value

The Nifty tested the previous swing high, but was unsuccessful in closing above it. During the last 30 minutes of trade, the index declined by 108 points due to profit booking at the swing high. It closed below the 50 per cent retracement level of the day’s move, forming a Shooting Star candle.

The profit booking came mainly from the banking stocks. It moved out of the Bollinger bands and back into the bands at the end of the day. The Volumes were lower than the previous day. As the Index closed above the previous day’s high, it negated the Hanging Man candle implications.

Now, the 20DMA flattened, indicating the pause in the downtrend. It took 15 days to erase the previous sharp fall in just six days.

The strong bull candle indicates regained strength in the trend. During the last 15 days, the declines were limited to just two days. The upside moves were sharper, and the downside moves were limited to a small range. This is the character of a trend, as all expansions are more than the contractions.

The daily RSI (60.56) entered into the strong bullish zone. The MACD also shows a strong momentum. By closing above the previous day’s high, the index maintained its strong momentum. But, the Shooting Star candle at the swing high shows exhaustion and tiredness in the trend. Today’s high of 19,875.25 is the strongest possible resistance for now. It is advised to take fresh long positions only above this level. Otherwise, stay on the sidelines and wait for the bearish signals. A close below today’s low of 19,627 will be negative and reverse the trend on the downside. Between 19,627 and 19,875 points, be on the sidelines. We may not get the strong directional trade.

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