Nifty charts signal more consolidation ahead
On a positive day, the index closed above the previous day’s high, but concern is the volumes recorded lowest after 26th June; It also formed a hammer candle
image for illustrative purpose
The week began on a promising note, expecting no change in RBI monetary policy on interest rates. The benchmark index, the NSE Nifty, gained by 80.3 points or 0.41 per cent and closed at 19,597.30 points. The Nifty Pharma and IT indices were the top gainers, with 1.56 per cent and 1.13 per cent, respectively. The Media, Metal, and the Bank Nifty closed with modest declines. All other indices are up by less than percentage points. The India VIX is up by 5.01 per cent to 11.10. The market breadth is positive as the advance-declines ratio is at 1.25. About 168 stocks hit a new 52-week high, and 105 stocks traded in the upper circuit. Zomato, HDFC Bank, SBI, and ICICI Bank were the top trading counters on Monday in terms of value.
The Nifty closed above the previous day’s high and formed a hammer candle. It almost tested the 20DMA. On a positive day, the volumes recorded lowest after 26th June, which is a concern. The low volume rises generally trustworthy. The Bollinger bands contracted further and indicated more consolidation on the cards. The index closed above the 38.2 per cent retracement level of the recent fall. The RSI is back to above 53. It needs close above the 60 zone for a bullish outlook. Even on the hourly chart, it is still within the neutral zone. But, it closed in the neutral zone. Like earlier rallies sustained more than three days, it must close positively for at least three days. The hourly MACD is above the zero line, but the histogram declines.
The Nifty closed above the hourly moving averages is a positive sign. As the RBI monetary policy is on the cards, the market may move in sideways till Thursday. Now, the 20DMA of 19,638 points will act as short-term resistance. Above this level, we may see the 2nd August Gap filling by testing 19,705 points. On the downside, In any case, the index closes below 19,562 points and will resume the downward momentum. Last week’s price range of 19,296-795 will be very crucial for the near-term direction. Either side’s move will lead to a directional trend. The focus will shift to the RBI policy and the commentary. The Mid-cap and Small-cap stocks will outperform the benchmark index for the next month.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
