Nifty has not given any weaker signals so far

Positive sentiment

• MACD histogram shows a strengthened momentum
• VIX closed at 15.14 after testing above 16 levels
• RSI (78.46) is near extreme zone
• 1307 declines and 1202 advances

The benchmark Nifty index continued to move higher for the fifth successive day. The Nifty gained by 123.95 points or 0.57 per cent and closed at 21778.70. The CPSE and PSE indices were the top gainers, with 2.35 per cent and 2.16 per cent, respectively. The Nifty Energy, FMCG, Pharma, Auto, and Metal indices were up by 1-1.5 per cent. The Nifty IT is the lone loser on Thursday, declining 0.14 per cent. All other sector indices closed with decent gains. The India VIX closed at 15.14 after testing above 16 levels. The market breadth was negative with 1307 declines and 1202 advances. About 196 stocks hit a new 52-week high, and 102 stocks traded in the upper circuit. HDFC Bank, HUDCO, Hindcopper, and ICICI Bank were the top trading counters on Thursday in terms of value.

The Nifty opened with a positive and sustained above the open level. It registered another lifetime high and closed near the day’s high. Today’s price pattern looks like an evening star candle. If the Nifty opens negative and closes below Thursday’s low of 21678, it will have negative implications on the direction. The index still has not given any weaker signals, but the conditions are not conducive to fresh purchases in the market. The Nifty is over eight per cent above the 50DMA, which shows an overstretched rally. Even though the index has not shown any weakness in any time frame, in the last nine days, there have been only two negative bars; one is a big bearish bar with a 1.41 per cent decline. All the sectors and broader market participation in the rally are positive in the current market scenario.

The index rallied by 800 points in the last five days. The volumes were above average for four days out of the last five days. They are also highest in the last eight days. The last hour’s massive volume may be because of short covering. The MACD histogram shows a strengthened momentum. The RSI (78.46) is near the extreme zone. As stated earlier, the index can remain in the extreme zone for some period. Recently, it spent 12 sessions in the above 80 zone. Keep the prior day low as a strict stop loss in these conditions. The breakout level of 21593 is the nearest strong support. As long as the index trades above this level, be with a positive bias. It can test the 22000 level as we forecast in the previous notes. Protecting the profits is the top priority now. There is no scope for shorting the indices.