Nifty above 15,227 will spur upswing, may touch prev high

WITH the continuation of profit booking and the weak global markets, the Indian benchmark indices closed in a negative zone for the third consecutive day. Public sector stocks were in focus in today's market. The Nifty lost 89.95 points and closed at 15,118.95. PSU Bank index was up by 5.60 per cent for the second day. Nifty PSE also closed with 4.36 per cent gain. Nifty IT and Metal indices were up by 1.3 per cent each. With the losses in private sector banks, the Bank nifty down by 0.88 per cent and the FinNifty lost 1.48 per cent. The Nifty breadth is negative. But the overall market breadth was positive as 1,050 advances and 856 declines were recorded in the day.

Our cautious approach yielded a good result today. As the market was in an overextended and overbought condition, it was trying to balance the structure. The Nifty closed below another short term average, 8EMA and much below the weekly opening. Consecutive three negative closing days and a 300 points decent correction result from profit-booking at a resistance point. It is a normal practice in the overbought market.

Any further fall below 14,977 will give us short-term weakness signals. Public sector stocks, particularly Banks and Oil and Gas companies, rallied today's market. Otherwise, the profit booking was seen in large-caps. The outperformance of mid, small and micro-cap stocks continued even in this weak market. This is another sign of maturity in the ongoing trend. The Nifty is trading 2.58 per cent above the 20DMA (14,739) is a critical support for the near-term outlook. The MACD line about to move below the signal line, and the histogram near the zero line suggests that the momentum is on the downside. Even the positive directional indicator, +DMI is declining, is a sign of weakening strength. As we discussed earlier, the Nifty closed below the breakout level and coming down towards the support line of prior box range. On a 75-minute chart, the RSI was at 40 support zone. A move below this level is negative for the short term. Simultaneously, the MA ribbon on lower time frame chart is trending down along with the MACD line below zero. In this scenario, a move above 15,227 will reverse the weakness and test the prior high again. A fall below 14,977 is negative for the market.

(The author is a financial journalist, technical analyst, trainer, family fund manager)