MACD still below signal line

The domestic equity market rallied for the second session. NSE Nifty gained 194 points or 1.10 per cent and closed at 17815.25. All the sector indices ended with decent gains. The Pharma index is the top gainer with 3.08 per cent. The Bank Nifty, Fin Nifty, Auto, Realty, and Metal indices are up by over 1.5 per cent. The remaining sector indices closed with 0.50 to one per cent gains. The market breadth is positive as 1240 advances and 642 declines. About 81 stocks hit a new 52-week high, and 107 stocks traded in the upper circuit. Ambuja Cements, Adani Enterprises and Bajaj Finance were the top trading counters on Tuesday.

The Nifty closed above the 20DMA. It also closed above the 17801, which is key resistance. But, with the afternoon sessions profit booking, the index has formed a Shooting Star kind of a pattern. It filled the last Friday's gap. The volumes are a little higher than the previous day, but the Open Interest declined by 3.87 per cent. On over one per cent gaining day, the decline in open interest suggests that the rally is because of short-covering. As we expected, the consolidation continued, and the supports were protected. The RSI moved above the 55 zone. The MACD line is still below the signal line. The +DMI moves above the -DMI, with positive moves for the last two days. The Elder impulse system has formed a neutral bar.

Currently, the Nifty is trading 3.24 per cent above the 50DMA and just 0.70 per cent above the 20DMA. The KST line is still in a downtrend. The RRG Relative Strength line is far below 100, and momentum has picked up above 100. Many Nifty stocks lack relative strength. The beaten down Pharma gained the most on Tuesday. Several central banks are meeting this week to take a call on inflationary measures. As there are event risks poised, it is better to have a cautious approach.

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