Nifty lacks drive to move further up

The equity market is moving higher though there is a low conviction. The Nifty opened with a gap up and closed just below the opening level. Finally, with a smart recovery in the afternoon session, it closed at 13,558.15, higher by 44.30 points. Barring Auto, Realty and Consumption sectors all other sectoral indices inched up. The CPSE and PSE indices were the top gainers as the PSU stocks were in the limelight today. Metal index up by 1.38 per cent and Infra and Pharma indices advanced by 0.94 per cent and 0.76 per cent respectively. The volatility index India VIX is up by 3.26 per cent. Overall market breadth is positive with 1,204 stocks closing higher, and only 697 declining. As many as165 stocks hit their new 52 weeks high, and only three stocks registered their new 52-week low.

The Nifty crawled to the highs with a series of indecisive bars. For the third consecutive day, it formed another doji candle day. Once again it took support at 20-period average on a 75-minutes chart. Almost every sector is in positive, and the breadth is positive. But the momentum is missing in this kind of broader market support.

It traded in a range of 125 points and closed below the opening level. With the recovery from the lower level, it formed a hanging man candle. In the last five days, It formed four similar candles of indecisiveness or bearish. But, the bears failed to close below the prior day low to end the bulls' domination.

These indecisive bars on a lifetime high require closing below the previous bar low. Unless that does not happen, the trend is intact on the upside. At the same time, it should complete at least 5EMA or 8EMA support. The Nifty is moving on the support of 5EMA almost every day since 13th November.

Several times the Nifty breached this very short term trend indicator on an intraday basis but failed to close below it. Now the 5EMA support at 13,576, is also the day's low. Keep watching this EMA to breach on closing basis for a weakness. As mentioned above, the momentum is lagging for the last month.

The negative divergence is persistent on a lower time frame chart. In this scenario, protect the capital with strict trialling stop loss and ride the uptrend. In any reversal, the stop loss will protect your capital and profits on the table.

(The author is a financial journalist, technical analyst, trainer, family fund manager)