Nifty may face resistance at 19,827pts

On a standalone weekly expiry day, NSE Nifty rallied by 116 points or 0.59 per cent and reclaimed the above 19,700 level. It closed at 19,727.05 points. After a three-day dullness, the banking and financials rallied the most. Bank Nifty gained by 1.06 per cent, and the Fin Nifty up by 1.02 per cent. The Nifty Realty Media indices gained by 1.48 per cent and 1.09 per cent, respectively. The Energy, Infra, and Mid-cap indices advanced by over half a per cent. The Nifty FMCG, Pharma, and Metals indices were closed with less than 0.50 per cent declines. The market breadth is positive. About 156 stocks hit a new 52-week high, and 98 stocks traded in the upper circuit. HDFC Bank, Mazdock, and Coal India were the top trading counters on Thursday in terms of value.

The 16-base breakout has resulted in a solid bullish rally. The Nifty reclaimed above 19,700 level. It has formed a strong bullish candle. The RSI entered into a strong, bullish zone. The MACD histogram shows a strengthened bullish momentum. ADX, which is a trend strength indicator, began to rise. The positive directional indicator +DMI, above the -DMI, is a positive signal for the market. The index closed above the upper Bollinger band, which may not be a negative sign for now. After flattening or contraction, the bands tend to expand. This expansion is the beginning of a new trend. The Nifty has already reached a five-week high and retraced over 61.8 per cent of the prior downtrend. The volumes were above average for the last five days. The index closed at the near day’s high and negated the bearish implications of the previous three candles. The Nifty rallied almost 500 points in the last four days. The index will test the previous high if it sustains above 19,700 points on a weekly closing basis. The major difference in the current rally is that the volume is also higher compared to the earlier bounces. That was the reason the previous bounce did not sustain more than 2-3 days.

The rally with a higher volume is trustworthy. At the same time, the current rally may extend for another three days for a maximum. All the minor trends are limited to 8-9 days, historically. Let us watch for the continuation of the rally target. Continue with long positions as long as the Nifty sustains above the prior day’s low. On the upside, the index may face a resistance of 19,827 points. Watch the price behaviour around this level.

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