Nifty needs pullback for healthy uptrend

The rally took a breather today on the eve of weekly expiry. The Nifty recovered in the last hour, and it recovered from the day's low due to short covering. Nifty closed at 13478.30 with 50.80 points decline. FMCG index rallied 2.81 per cent with the support of Britannia, Nestle, ITC, HUL and COLPAL. All the sectoral indices fell by 0.25 per cent to 0.65 per cent. The overall market breadth is negative as 1,171 stocks declined, and 726 stocks advanced.

On a weekly expiry day, the volatility ruled the market. The last hour short cover pulled up the market from a deep in the red condition. The Nifty recovered over 80 points from the day's low. The bears failed to close below the previous day low. FMCG and Metal stocks limited the fall in the benchmark index.

The opening with over 40 points gap down, and it fell below 13,400 levels. For the first time after 27th November, the Nifty closed with negative bias and made a lower high. It formed a hanging man candle, which will have bearish implications if the following day candle closes in the negative zone. It is evident that the market is in the extreme overbought condition and needs a decent pullback for a healthy uptrend.

A retracement towards 13,360-260 zone of support is important to the continuation of the trend. Though hanging man candle formed, as there is no bearish confirmation, it is wise to be in sidelines for now.

The bearish confirmations elusive in the recent past, it is better to follow the trend following techniques. Currently, take out the profits from the table and wait for a clear trade signal. A fall below the 13,400 is a weaker signal and a move above 13,500, will continue the trend. There will no trade between these levels. Tomorrow's weekly close is also important for future direction.

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