Nifty likely to move further up as no weakness visible

Stock markets rallied further and made another new high. The PSU banks were in the limelight in today's market. Even though more number of stocks fell, Nifty gained as heavyweight Reliance, and IT stocks were in the top spot. The Nifty closed at 13392.95 with 37.20 points gain. PSU Bank index up by 7.13 per cent. Nifty IT index inched up by 0.79 per cent. Pharma and metal indices were down by over one per cent. Volatility index India VIX inched up by 3.29 per cent. The Put-Call Ratio (PCR) was at the highest level of 1.84, which shows that the upward move is limited. The declines outnumbered advances in the broader market.

The unabated journey continued for Indian benchmark indices. As we projected earlier, Nifty reached near to our target zone. It closed higher for the eighth consecutive day. Undoubtedly, the trend is still upwards. No weakness is visible. But, the concerns still remain on the technical and fundamental front. In the past, the rallies were limited to eight days for many days.

This time, we need to watch whether the rally can continue beyond eight days. As it formed a doji candle and closed below the open price, is not a good sign for the bulls. It shows the extreme tiredness in the trend. The Nifty breadth is also negative. Even on the 75 minutes charts, the Nifty has not made any lower high or lower low.

As long as this does not happen, traders need to remain with bullish bias. However, all indicators are in an extreme overbought condition. It requires some retracement to continue the trend. No trend continues without retracement.

A healthy retracement or a retesting of a breakout point is required for a healthy trend. Bearish formation failed to get a confirmation in recent history. This time also, the probability may be less, but, it is wise to be cautious on long positions.

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