Nifty in an uptrend with higher volatility

Despite the Federal Reserve keeping policy rates unchanged, the equity markets closed positively. The Nifty is higher by 43.25 points or 0.19 per cent and settled at 22648.20. The PSE is the top gainer with 2.29 per cent. The CPSE, auto, energy, and metal indices gained over 1.1 per cent. The media index declined by 1.58 per cent and is the top loser. The Banknifty and realty indices closed with negative bias. Both PSU and private sector bank indices declined on Thursday. All other sector indices closed with modest gains. The India VIX is up by 4.47 per cent to 13.44. The market breadth is slightly positive as 1380 advances and 1263 declines. About 160 stocks hit a new 52-week high, and 126 stocks traded in the upper circuit. REC, Kotak Bank, ICICI Bank, PFC and HDFC Bank were the top trading counters on Thursday in terms of value.

The volatility has increased significantly in the last two swings. First, the downswing had a gap in openings, and support was found at rising channel support. The bounce trapped all the short sellers, positional or intraday traders. For five days, it made lower lows, too. The current nine-day upswing has more confused price action. It formed indecisive and bearish candles but moved higher. On Tuesday, Nifty hit a new lifetime high and formed a shooting star candle, which is bearish. It failed to get a confirmation on Thursday, for its implications. Even the previous doji, and dark cloud cover candles also failed to get the confirmations. The bearish patterns have failed several times in recent times.

On Thursday, it formed an open-low candle, which is bullish in nature. But it failed to move above the prior day’s high. The opening was exactly at the previous day’s low. After the opening hour, the index struggled to maintain its momentum. The hourly MACD and RSI lines declined. It faced resistance around 22700 and made a lower low candle on the hourly chart. Though the volumes were higher than the previous day, the intraday price action is not giving to go aggressively bullish, as the index has formed a long upper shadow candle. At the same, it has not made a lower low and declined below the support; we cannot be bearish. The index is in an uptrend with a higher volatility. The 8 DMA of 22519 and the 20DMA of 22453 are the immediate support zone. The RSI must close above the 60 for a strong bullish bias. On the upside, if the index moves above the 22710-776 zone, it will be positive and can test the 22920 and 23150. Stay cautiously optimistic and apply strict money management rules. The rising volatility will hurt the portfolio.

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