Nifty lands in uncharted territory as mkts rally

The 24,165-291 levels may act as a resistance. Unless a close below the prior day’s low of 23805, there is no point in taking short positions at current levels. As the index is far away from the 20DMA, by 3.50%, it may experience a mean reversion sooner or later

Negative Market Breadth

• 1,705 declines
• 971 advances
• 92 stocks in upper circuit
• RSI near overbought condition
• 167 stocks hit a new 52-wk high
• MACD shows strong bullish momentum
• Bollinger Bands shows overstretched trend

The equity benchmark indices continued to rally to a new high. NSE Nifty closed above the 24,000 level for the first time. It gained by 175.70 points or 0.74 per cent and closed at 24,044.50. On Thursday, Nifty IT sector has led the market with 2.03 per cent gains. The Commodity, Energy, and Infra indices are up by 1.02 per cent to 1.34 per cent. The PSU Bank index is the top loser with 0.92 per cent, followed by Small-cap index with 0.67 per cent. The Pharma and Bank Nifty closed with minor declines. The VIX is up by 0.77 per cent to 14.15. The market breadth is negative as 1,705 declines and 971 advances. About 167 stocks hit a new 52-week high, and 92 stocks traded in the upper circuit. Mazdock, HDFC Bank, Reliance, and India Cements were the top trading counters in terms of value.

The Nifty registered a massive 737.45-point rally in the last four days. The daily range was almost 200 points each day. Thursday’s 165-point move was the highest volume in the last four days. After retesting rising channel support, it bounced sharply and broke the tight range. The index is in uncharted territory, and no resistance is visible currently. The 127.6 per cent Fibonacci extension of Thursday’s move is 24,165 points, and the current week’s extension is 2,491. This zone of 24,165-291 may act as a resistance. Unless a close below the prior day’s low (23,805) is with the trend. There is no point in taking short positions at current levels. As the index is far away from the 20DMA, by 3.50 per cent, it may experience a mean reversion sooner or later. The Bollinger Bands are showing an overstretched trend. As the monthly derivative expiry, the index might have rallied. The RSI is now near overbought condition. The MACD shows strong bullish momentum. The Stochastic RSI is in the extreme zone.

Interestingly, the broader market breadth has been negative for the last three days. The declines outnumbered the advances in the last three days. The kind of unbelievable rally, in the last four days after indecisive wavering moves of the prior 10 days, the impulsive move is extended to 1.68 per cent per cent, which is also overstretched. As mentioned above, the 23,805 is a strong support now. Before that, the 23,913 is also a minor support. Below these levels, the index may retest the 23,718 points. We can’t forecast more than this. For now, staying with the trend with a strict stop loss is a wise strategy. Wait for a reversal signal to book profits.

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