Nifty signals strengthening in trend

The NSE Nifty registered the highest closing after 41 weeks. It also recorded a second successive gap up and third consecutive positive closing. The Nifty closed at 18,145.40 with 133.2 points or 0.74 per cent. Nifty Bank and Media indices were closed with small losses. All other sector indices registered decent gains. The metal with 2.38 per cent, pharma with 2.12 per cent and IT with a 1.89 per cent gain, led the market rally.

All the other sector indices closed with decent gains. The market breadth is positive as 1,045 advances and 832 declines. About 60 stocks hit a new 52-week high, and 85 stocks traded in the upper circuit. Axis Bank, Reliance, and Adani Enterprises were the top trading counters in terms of value.

The Nifty has registered a breakout by closing above 18,115 and above the prior swing highs. The improved volumes validate the breakout. The strong bullish bar on a weekly chart shows that the trend strength is stronger. Now, the only concern is hanging man candles on the swing high. A lower low and high candle and a negative closing will confirm its bearish implications.

Until then, it is better not to venture to take short positions. The previous highest closing prices are 18,255.75 and 18,338.55. If we connect these two price points, the current closing is broken of this trendline resistance. A Closing above these prices will be a big positive for the markets. The current price structure also looks like an inverted head-shoulder breakout on a line chart.

The neckline is at 17,784. As long as the Nifty trades above this level, bulls will be in control of the market. On an hourly chart, the indicators show the overbought condition. Any profit booking may test the support levels. For now, no weakness in the market and be with a positive bias with a trialing stop loss.

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