Some consolidation likely in near term
The 75 sessions of the downtrend has retraced 70% in 28 days; Nifty rallied by 8% in just 21 days (Fibonacci Numbers); Now, Nifty can test 18,446 points, a 78.6% retracement of the prior downtrend
image for illustrative purpose
The benchmark indices rallied to the new swing high as the event risk is over. NSE Nifty gained by 165.95 points or 0.92 per cent and closed at 18,255.80 points. It registered one of the biggest gaining day. Only the FMCG index was the loser by 0.13 per cent. FinNifty and Metal indices were the top gainers with 1.55 per cent and 1.22 per cent, respectively. The Nifty 500 is up by 0.85 per cent. All the sectoral indices gained by over half a per cent. The market breadth is extremely positive, as the advance-decline ratio is at 2.25. About 78 stocks hit a new 52-week high, and 75 stocks traded in the upper circuit. HDFC Bank and ICICI Bank, and RVNL were the top trading counters today in terms of value.
Nifty formed a strong bullish candle and climbed above the Tuesday high. Today's move erased all event risk fears. It also closed above the 16th February and 24th January swing highs. Interestingly it also cleared the previous resistances of 4th April 2022 and 14th September swing highs.
Now, it can test 18,446 points, a 78.6 per cent retracement of the prior downtrend. The 75 sessions of the downtrend has retraced 70 per cent in 28 days. The Nifty rallied by eight per cent in just 21 days (Fibonacci Numbers). The index also extended over 61.8 per cent of the prior swings. After this huge rally, it needs to consolidate to continue the strong uptrend. Price always moves in trends and in a staircase manner.
The RSI and MACD lines are either in overbought condition or over-extended. The index is now 4.14 per cent above the 50 DMA, and 2.71 per cent above the 20 DMA. As the index moved at a distance from the mean levels, we may see some consolidation in the near term. The Nifty also closed above the upper Bollinger band, which is also an indication of price over-extension from the mean level. If the rally continues, it needs to sustain above the 18,240 points level on a weekly closing basis. The 18,446 level may act as immediate resistance. Only in case of a decline below Wednesday’s low 18,042 we may expect some retracement. As many stocks registered a monthly breakout, expect more positive action will come. Ride the trend till the evidence shows reversal signs.
(The Author is Chief Mentor, Indus School of Technical AnalysisFinancial Journalist, Technical Analyst, Trainer, Family Fund Manager)
