Nifty Forms Bullish Candle, But Volume Falls

NSE Nifty registered another big positive day as the short coverings and rollovers were picked up. The Nifty gained by 205.85 points or 0.90 per cent. Only the FMCG index declined by 0.50 per cent, and all other sectoral indices closed positively. The Microcap and Smallcap indices are the top gainers with 3.47 per cent and 3.32 per cent. The Realty and Media indices were up by over 2.5 per cent. The Midcap, Energy indices are up by over two per cent. The market breadth is positive as 2,311 advances and 528 declines. About 98 stocks hit a new 52-week low, and 212 stocks traded in the upper circuit.

The Nifty closed above the prior day’s high with an improved market breadth. It formed a strong, bullish candle. But the volumes were lower than the previous day. It also closed above the Monday’s gap area and 8EMA resistance. The RSI entered into the neutral zone and formed a bullish divergence. The MACD has given a fresh, bullish signal. Interestingly, the VIX continued to rise and reached above 18.4. The Implied Volatility has also increased to 32.35 during the day, which is the highest level in recent times. As the event risk is nearing, it is expected to further rise in these volatility indicators. The Straddle premium for the 6thFebruary expiry is at Rs677, which is higher side. For the next three days, technical analysis will take a back seat as the emotions play at the highest levels. The lot sizes in the derivative segment are increasing from the February series, which may impact the volumes. For now, protect the profit if there are any with a strict stop loss.

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