Nifty continue to rally for 5th straight session
Market moves may be euphoric, but staying cautious and protecting the profits and capital is more important for traders
image for illustrative purpose
The Nifty continue to rally for the fifth straight session. With all sectors and broader market participation, the Nifty gained by 149.95 points or 0.84 per cent and settled at 18065. The Nifty IT sector stocks led the market rally today with a 1.29 gain. The Infra index is the top gainer with 1.46 per cent. The Energy and FMCG indices advanced by 1.24 per cent and 0.96 per cent, respectively. The PSU Bank index is up by 2.45 per cent.
All other indices were up by less than a per cent. The India VIX is settled at below 11 (10.95). The Advance-Decline Ratio is positive at 2.08. About 66 stocks hit a new 52-week high, and 70 stocks traded in the upper circuit. HDFC Bank, Axis Bank and ICICI Bank were the top trading counters today in terms of value.
The Nifty rallied for all five days in the week and settled near 18000 levels. It met our forecast of the 18000-100 target. Before analysing the Nifty, we need to focus on the India VIX, which declined below 11. This is not a good sign for a trending market. Low VIX may lead to a sharp reversal in an unexpected manner. Currently, the VIX is below the December 2019 low.
This low has led to several bear attacks in the past. It is not the case for the Indian market; all the world markets experienced a similar pattern. All the market tops formed on a low VIX. It is advised not to be complacent about the positions. Traders must be cautious and vigilant and prepare for possible changes in the market direction.
The benchmark indices met the pattern target. The Nifty reached the 61.8 per cent retracement level (18111) of the prior downtrend. It also reached the previous swing high of 18134. It is also extended by 50 per cent of the recent swings. The RSI has reached an overbought zone.
Market moves may be euphoric, but staying cautious and protecting the profits and capital is more important for traders. If the Nifty extends its rally beyond 18134, it can test 18300 and 18503. These are the maximum level we can forecast at this juncture. But Only a decline below the previous day's low with high volume indicates the reversal. Until then, avoid short positions, and stay on the long with strict trialling stop loss.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
