Nifty at conjunction of 20& 50DMA

NSE Nifty bounced from the key support and closed above the previous day’s high on Friday. The broader market participation indicates more consolidation on the cards. The Nifty gained 181.30 points or 0.94 per cent and closed at 19435.30. Only the Nifty Pharma index was down by 0.56 per cent. All other sector indices were positive. The Nifty Metal and Energy indices were the top gainers with 2.88 per cent and 2.37 per cent. PSE and CPSE indices gained by 3.50 per cent and 3.02 per cent, respectively. The Auto, IT, and Infra indices gained by over 1.1 per cent. Other sector indices registered decent gains. The Market breadth is positive. The India VIX is down by 5.78 per cent. About 184 stocks hit a new 52-week high, and 85 stocks traded in the upper circuit. HDFC Bank, BHEL, and Reliance were the top trading counters today in terms of value.

Nifty erased the last five-day losses and closed above the previous day’s high. It closed at the conjunction of 20 and 50DMA. The volumes were also above the average, below the previous day. The Nifty formed a base in the 19250-19500 zone. Either side of this breakout will result in a directional move. The RSI has formed a positive divergence and closed above the 50 zone. This has resulted in a bounce. If the RSI moves above 60, the rise will continue in the 19650-700 zone of resistance. This zone is nothing but a 61.8 per cent retracement level and the previous swing high. The MACD line also began to turn up. As we expected, the five declined has ended. Historically, the Nifty rarely extends beyond five weeks. The Nifty has retraced 23.6 per cent of the previous five-week fall in just one day. But in a monthly chart, the Index has formed an engulfing candle at the top. As a five-week decline ended, it also ended the five-month rally. It must get a confirmation for the engulfing candle for the downtrend to continue. Only a bounce above 19,700 points will get a decisive reversal signal. Stay on stock specific. The PSU will continue to rally along with mid- and small-cap stocks.