Nifty negates indecisiveness

A close above 20DMA is necessary for the continuation of the retracement. Normally, the 50 and 61.8% retracement levels are crucial resistances. Above the 6.18% retracement level, expect more upside. As the truncated week of three trading sessions next week and the financial year closes, we may see huge adjustments in the positions

The equities continued to rally for the second day. Barring Nifty IT index all the sectors closed in green. The Nifty gained by 84.80 points or 0.39 per cent and closed at 22,096.75 points. Nifty IT index was the only loser with 2.33 per cent. Nifty Realty and Auto indices were the top gainers with 1.76 per cent and 1.67 per cent, respectively. The Media, Pharma, and Consumption indices were by over one per cent. All other indices registered less than a per cent gain. The India VIX fell by 2.34 per cent to 12.22. The market breadth is positive as 1,688 advances and 893 declines. About 50 stocks hit a new 52-week high, and 176 stocks traded in the upper circuit. HDFC Bank, Reliance, TCS and Infosys were the top trading counters on Friday, in terms of value.

On a weekly basis, the bears failed to get the confirmation for last week’s bearish engulfing. Last two days, the Nifty rallied by 438 points or 2.02 per cent, after the Federal Reserve’s commentary. The 10-weekly average acted as a strong support again, for the sixth time in the last nine weeks. The index closed above the previous day’s high and negated the indecisiveness. After testing the 20DMA, it closed just 0.32 per cent below the 20DMA and 0.69 per cent above the 50DMA. Importantly, Nifty closed above 22,023 points, which is a 38.2 per cent retracement level of the prior downswing. Though it moved above the 50 per cent retracement level of 22,118 points, at the end of it closed just below it. All the initial losses were recovered in the last two days. Currently, the index is stuck between 20 and 50DMA. A close above 20DMA is necessary for the continuation of the retracement. Normally, the 50 and 61.8 per cent retracement levels are crucial resistances. Above the 6.18 per cent retracement level, expect more upside. The last two days’ rally is news-based and needs to gain further strength. As the truncated week of three trading sessions next week and the financial year closes, we may see huge adjustments in the positions.

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