MACD signals bullish sign

On a positive global future, the domestic equity market closed higher for the second day. The NSE Nifty ended at 17311.80 with 126.10 points or 0.73 per cent gain. The Bank Nifty and the Fin Nifty are up by 1.56 per cent and 1.15 per cent. The Energy index gained by over 1.52 per cent. The Nifty Metal and Media indices are down by nearly 0.97 per cent and 0.80 per cent, respectively.

All other indices advanced by less than a percentage point. The market breadth is negative as 1091 stocks declined and 822 advanced. About 66 stocks hit a new 52-week low, and 77 stocks traded in the lower circuit. Reliance, HDFC Bank and Tata Elxsi were the top trading counters on Monday.

Equities continued to rally for the second successive day. The Nifty opened with a gap down and recovered within a few minutes of trade. It closed above the 50DMA and the 20DMA but failed to move above the previous day's high. The MACD has given a bullish signal by crossing the signal line. The weekly and daily Relative Strength index also closed above the prior high and above the 50 zone, which is a positive sign for the market. However, the concerns on the bullish remain.

The volume is less than average and much below Friday's volume. Even the Nifty futures open interest is very slightly gone up. The Nifty is yet to make a higher high, though it has made ascending bottoms. On the hourly chart, the index has recovered like a V shape. Generally, the V shape recoveries need a strong follow-through day.

The negative market breadth is another worry for the directional bias. On a strong bullish day, the histogram is flat, indicating that the momentum is not yet picked up on the upside. The Banks and Financial Services stocks led the rally on Monday, in particular the heavy-weight SBI.

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