Nifty Trading Above 200-Day EMA

The domestic equities registered another big day. The benchmark index reached to the prior swing high. NSE Nifty gained by 307.95 points or 1.32 per cent and closed at 23,658.35 points. All the sectoral indices were closed higher. The PSU Bank index is the top gainer with 3.18 per cent. The PSE, Private Bank, CPSE and Fin Nifty rose by over two per cent. Auto, Pharma, Metal FMCG, and Consumer Durable index closed with less than one per cent gains. All other indices gained 1-2 per cent. The India VIX is up by 8.95 per cent. The market breadth is positive as 1,865 advances and 11,082 declines. About 62 stocks hit a new 52-week low, and 202 stocks traded in the upper circuit. BSE, Reliance, Kotak Bank, HAL, and FinCables were the top trading counters in terms of value.

The equities rallied impulsively to the prior swing high. The Nifty is now just less than a hundred points away from the prior swing high. The Nifty is now trading above the 200-day Exponential Moving Average (EMA), a positive sign. The volume was much less than the previous day. Today’s bar is closed out of the Bollinger bands, which is an indication of an extension of the rally. The RSI is also in the overbought condition. The hourly RSI has been in the extremely overbought zone for the last three days. The prior swing high of 23,808 is crucial now. If the Nifty moves above, it will make a new higher high, which is the first sign of trend reversal. As the index rallied 1,744 points or 7.94 per cent from the 4th March low, its impulsive nature may enter into a counter-trend consolidation any time from now. The Anchored VWAP resistance is at 23,718, which is the immediate resistance. The Stochastic RSI is also at the extreme zone. The 23,781-808 zone is very crucial now. In any case, it closes negative on Tuesday; it gives clues on the future direction. As long as it trades above the prior day’s low, it is better not to venture into short positions. Only a close below the prior day will give weaker signals. As the monthly expiry is just three days away, the rollovers may influence the price action. The heavyweights HDFC Bank and Reliance contributed over 92 points in today’s rally. ICICI Bank, SBI, and Kotak Bank together contributed 87 points.

(The author is partner, Wealocity Analytics, Sebi-registered research analyst, chief mentor, Indus School of Technical Analysis, financial journalist, technical analyst and trainer)