Mkts hovering in consolidation mode
Nifty in need of breakout to resume trend; The index closed above last Friday’s high and 8EMA with higher volumes
image for illustrative purpose
The week began with decent gains and better breadth. NSE Nifty gained by 107.75 points or 0.55 per cent. Only the FMCG index closed negative, and other sectoral indices gained. FMCG index down by 0.68. The PSE and CPSE indices are up by over two per cent. The Energy and Metal indices gained by over 1.5 per cent. All other indices closed with decent gains. The market breadth is very strong as the advance-decline ratio is strong, as the advance-decline ratio is at 1.93. About 246 stocks hit a new lifetime high, and 98 stocks traded in the upper circuit. HDFC Bank, ICICI Bank, and PEL were the top trading counters on Monday in terms of value.
The Nifty Bounced from the 20DMA support for the second successive day. It closed above the previous day’s high and 8EMA. Volumes were higher than the previous day. As we expected, the 20DMA acted as strong support, or the index tested the mean reversal support and bouncing. The RSI took support at 60 and bounced. These are the positive technical development of Monday trading.
But, there are some concerns. We can judge with one day move to be strongly bullish or end of the pullback or mean reversion. As the Nifty made a lower low, we need to wait till it forms a higher high to be bullish. Thursday’s high of 19,868 points is the minor high, and above this level, we can assume the minor pullback is done. The index has formed a downward channel and has to register a breakout for the trend to resume.
As we discussed earlier, there are no bearish signs as the index is still trading above the 20DMA, currently at 19,599 points. As long as the index trades above this level, be with a positive bias. If the Nifty moves above 19800, the trend resumption probability will be very high. For the last three days, the monthly VWAP acted as a support. For an intraday, the 8EMA of 19701 will be the key support. The market is in a consolidation mode, and the directional biases will be established above or below the resistance and supports. Stay cautiously optimistic now.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
