Nifty Forms Higher High Above 200DMA, Confirms Uptrend

The benchmark index cleared the prior highs and into a confirmed uptrend. NSE Nifty gained by 273.90 points or 1.15 per cent and closed at 24,125.55 points. Only FMCG index is down by 0.96, and all other sector indices were closed in the green. The Energy, and the Midcap indices were the top gainer with 2.50 per cent, each. The PSU Bank, Oil and Gas, IT, Realty, Smallcap, Private Bank, Auto and Metal indices gained over two per cent. The other indices advanced by 0.59-2 per cent. The India VIX is up by 0.31 per cent to 15.51. The market breadth is positive as 2,251 advances and 683 declines. About 93 stocks hit a new 52-week high, and 166 stocks traded in the upper circuit. HDFC Bank, BSE, ICICI Bank, Infosys, and Axis Bank were the top trading counters in terms of value.

The Nifty continued its impulsive move for eight straight days. It has rallied by 2,445.90 points or 11.25 per cent. The basic trend rule is that if the trend is too steep or flat, it may not be an indication of a sustainable trend line projection, and the same shall not be trusted. The 45-degree trend slope will sustain for a longer period. You can see this type of trend in the longer time frames. This almost 90-degree trend may not sustain for a longer period. It may enter into a counter-trend, sooner or later. Technically, the Nifty has formed a higher high and closed above the 200 DMA, which is a confirmed uptrend. The index is also above the 40 and 50-week averages. The trend is strongly bullish as the index is trading above all key long and short-term averages. However, all the impulse moves have to correct at least 38.2 per cent of the prior move, currently at 23,255, which is also the 20DMA level. Expect this reasonable correction in the near term. The volumes were lower than the previous day, but above average. On the hourly chart, the index is in the extreme overbought condition, which may lead to a profit booking. Three days before the monthly expiry, the rollovers were at 23.24 per cent. If the monthly rollovers were less than 80 per cent, expect the trend to cool off. As the rally is very impulsive, stay cautious and be in the side-lines.

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