Nifty Crosses Over 20DMA

With the strong global markets, the domestic equity indices rallied sharply. NSE Nifty gained by 325.55 points or 1.45 per cent and closed at 22,834.30 points. All the sectoral indices gained decently, above one per cent. The Media and Realty indices, gained by 3.62 per cent and 3.16 per cent, respectively and are the top gainers. The Microcap index also gained by 3.01 per cent. The Small-cap and Consumer Durable indices gained by 2.62 per cent each.

The Auto, PSU Bank, Midcap, Metal, and Bank Nifty indices gained over two per cent. The India VIX is down by 1.53 per cent to 13.21 per cent. The market breadth is extremely positive, as 2228 advances and 646 declines. About 220 stocks hit a new 52-week low, and 121 stocks traded in the lower circuit. ICICI Bank, Reliance, HDFC Bank, Zomato, and BSE were the top trading counters today in terms of value.

The Nifty filled the 24th February gap area with a big gap-up opening and closing above the gap. The index is now above the 20DMA. The index also closed decisively above the 38.2 per cent retracement level of the prior fall. It closed above the prior minor high and registered an ascending triangle breakout. As we expected, the move is impulsive after the last seven-day sideways breakout. The Nifty closed at the day’s high. However, the volumes did not increase as the price spurt. This gives some suspicion about the big move. The open interest is up by just 1.89 per cent and shows mostly short-covering. The RSI moved to 54. The nearest resistance is at 50 DMA of 22997 and the 50 per cent retracement level of 22,919 points. The index may test the 50 retracement level, but sustaining above that is important for a bullish reversal signal. The index is now just 0.64 per cent below the 50DMA.

At the same time, the flattened Bollinger bands must turn on the upside to confirm the uptrend. As stated earlier, if the index closes below the prior day low, the downside will resume. Otherwise, be with a positive bias for now.

(The author is partner, Wealocity Analytics, Sebi-registered research analyst, chief mentor, Indus School of Technical Analysis, financial journalist, technical analyst and trainer)