Short-term chart shows sideways trading

The equities continued to rally for the third consecutive day. The Nifty inched up by 103 points or 0.58 per cent and settled at 17936.35. The Nifty IT and Realty sectors are the top gainers in Monday's market with 1.42 per cent and 2.20 per cent gains. The Smallcap-100 is also up by 1.33 per cent. All the sectoral indices are in the green with 0.2 to one per cent advances. The market breadth is positive as 1200 advances and 710 declines. About 108 stocks hit a new 52-week high, and 115 stocks traded in the upper circuit.

The Nifty tested almost the previous swing high, but hesitated to cross it. It gapped up and formed an upper shadow with a small body. This indicates that the benchmark is indecisive for now. After the first hour, it traded just a little over 60 points range the whole day. On an hourly chart, the momentum has waned. The MACD line is about to cross under the signal line.

The lowest volume was recorded on Monday. At a new swing high, the index is showing signs of exhaustion, as it declined sharply in the last 30 minutes with a higher volume. The index has developed a negative divergence in RSI on an hourly chart. The Bank Nifty also formed a parallel high on Monday and an indecisive Doji candle. Though the index is indecisive, and there is no weakness in the market. The broader market indices Midcap-100 and Smallcap-100 outperformed the benchmark index. Even the Nifty-500 index is in a good bullish bias. The only case the Nifty fails to close above 17992 and closes below 17786 is negative for the market. The short-term chart shows the sideways, but the long-term is still bullish. It is better to avoid shorting the markets for now. Focus on stocks rather than indices. Several stocks are breaking above the base with higher Relative Strength.

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