Nifty set to march ahead with no weakness signs

The Indian equity markets moved further higher levels. Nifty almost reached 14,000 levels, but, with long unwinding due to monthly expiry, it closed nearer to the opening level. The Nifty gained by 59.40 points and closed at 13,932.60. The Nifty Bank and financial services indices advanced by 1.43 per cent and 1.03 per cent, respectively. IT index also gained by 0.72 per cent. Nifty Metal and media indices fell most by 1.09 per cent and 1.45 per cent. Twenty-seven stocks in Nifty closed lower. The overall market breadth is negative, as inclines were outnumbered by declines.

The Nifty continued the rally for the fifth day but looks tired before the expiry. It moved in little over hundred points range and formed a small body candle. It traded mostly within the first-hour range. The rise was on a negative market breadth and a declined volume.

Today's rally mainly driven by the banks and financial services sector stocks. The India VIX gained by 1.77 per cent indicating the volatile moves before the December derivative expiry.

Even though the market closed higher, the momentum is waning. At the same time, there is no significant weakness visible on any time frame. The price did not close below the prior bar low, even on the hourly chart. The only thing clearly visible is the momentum is lagging. The MACD histogram on the 75-minute chart is clearly declining for the past two days.

Apart from this, every indicator suggests the overbought condition. Moreover, the derivative data suggests, the shorts were built-up, and the long unwinding is happening in the major counters.

As the expiry is on the cards, this is a general phenomenon. But the question is how long we go. As a trend following trader, one should follow the price action, as long as it does not close below the prior bar low, at least on an hourly chart, continue with the long positions. Currently, the support levels further inched up to 13,777, which is a breakout level. And 13,712 (8EMA) will act as critical support for the ongoing uptrend. Only a close below these levels we get the weak signal. As the Nifty is trading at lifetime highs, there is no resistance in place.

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