Nifty forms a strong bullish candle on charts

The domestic equities rallied to the prior swing high on a strong note. All the sector indices closed with decent gains. The frontline index, NSE Nifty, closed at 18012.20 with 225.40 points or a 1.27 per cent gain. The Nifty IT and Auto indices advanced by 1.45 per cent each. Fin Nifty, Infra and Pharma indices were up by 1.26 per cent to 1.39 per cent. All the other sector indices closed with less than percentage points. The market breadth is positive as 1068 advances and 845 declines. About 67 stocks hit a new 52 week high, and 86 stocks traded in the upper circuit. Maruti, Reliance and Bandhan Bank were the top trading countries on Monday in terms of value.

The Nifty opened with a big positive gap and sustained until the end. It formed a strong bullish candle. The strong bullish candle is supported by all the sectors and positive market breadth. But, the concern is that the rally is with low volume. It is almost near the prior swing high. As mentioned earlier, the index has no weakness in any time frame. The support raised to 17,800. The Nifty is trading 3.84 per cent above the 20DMA, 2.87 per cent above the 50DMA. As the distance from these key moving increases, the market will experience the mean reversion. Importantly, the Nifty closed above the upper Bollinger band. The index has to close within the bands in the next two days.

Now, the 18,115 level stands as strong resistance for now. A decisive close above this is a very big positive for the market. Above 18115, the immediate target is 18204 and 18548. As long as it trades above 17860, be with a positive bias. We can also consider this move as the end of the bear phase and entering into a new bullish phase. The bull phase' new targets are intact at 19421 in the short term. There are no negative divergences in the major indicators. The concerns are low volume rally and an overbought condition in the lower time frame charts. As the beaten down, sectors like IT and Pharma are showing some strength for the past few weeks. Let us be with a positive bias, as long as there are no confirmed bearish signals with at least for five or six distribution days.

(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)