Nifty set to consolidate as global positive cues persist

THE market rallied another over one per cent with the positive global cues. All the sectors took part in today's rally, and Auto, IT stocks were the major drivers for the market. The Nifty was up by another 1.07 per cent and closed at 14,919.10. Though the intraday volatility was higher, the India VIX was further down by 7.88 per cent. Nifty IT and Auto indices advanced by 3.04 per cent and 3.19 per cent.

The broader indices, the Nifty-500, Midcap-100, and Small-cap-100 were up by 1.2 per cent to 1.7 per cent. Only the PSU Bank index fell by just four points. The market breadth is positive as 1,160 advances and 724 declines were recorded. The Nifty formed a Hammer candle after testing the last Friday's high. It faced resistance, declined and filled today's opening gap and closed at Friday's high. After oscillating, it settled at near to the previous close with the last 30 minutes sharp rise. The market witnessed the wild moves on Tuesday in a shorter time frame. The last two days' price action did not improve the strength in the trend. The ADX was below the +DMI and -DMI and below the 25 zone. This structure shows the positive strength weakened.

Even on the 75 minutes chart, the MACD line was still below the zero line. The last 30 minutes rise shows some buying interest generated. The Friday gap area of 14,919 –15,065 will be a critical zone for tomorrow. The Nifty exactly faced the resistance at 61.8 per cent retracement level of last Thursday-Friday move. As it formed higher lows in the last two days, it looks positive on the charts. But, the conviction is missing as there is no trend strength. Unless the ADX moves above 25 and the +DMI reaches above the -DMI on a daily basis, it cannot be a convinced up move. At the same time, the Nifty must move above the 20DMA for an uptrend to resume. The broader consolidation may continue in the 15,432 – 14,467 zone. The Nifty also faced resistance at precisely 50 per cent retracement of this zone. Let us wait and see for the decisive move and the behaviour in the gap area.

(The author is a financial

journalist, technical analyst, trainer, family fund manager)