The daily MACD indicates fresh buy signal

The equity benchmark indices opened flat and rallied higher after a small dip in the morning session. The NSE Nifty closed at 16871.30 with a gain of 240.85 points or 1.45 per cent. TheBank Nifty up by 2.30 per cent and the FinNifty advanced by 2.16 per cent. The Media index is also gained by 2.45 per cent. The IT index advanced by 1.92 per cent. The Realty index is the top loser with 1.69 per cent. Pharma, FMCG, and Metal indices closed negatively. The VIX is up by 1.31 per cent. The market breadth is negative as 1115 declines and 943 advances. About 53 stocks hit a new 52-week high, and 162 stocks traded in the upper circuit. BSE, Jubliant Foodworks and Infosys were the top trading counters.

The Nifty jumped above the key resistance of 16840 with the strong bull candle. The index is above the 200EMA and 20DMA. The 240-point rally doesn't have volume support. In fact, the volume is lesser than the previous day and much below the average. This raises some doubts about the last two days of positive closing. To continue the rally, it needs to sustain above the 20 DMA (16741). In other words, as long as it trades above the 20DMA, be with a positive closing. The daily MACD has given a fresh buy signal. The RSI has also broken out of a channel. But, -DMI is still much above the +DMI and ADX. On a 75 minutes chart, the RSI reached an overbought condition and showed a hidden divergence. Interestingly, the broader market indices underperformed, and most interestingly, the market breadth is negative. As the cash volumes are lower on a 1.5 per cent advancing day, the benchmark index missed the follow-through day. In any case, the Nifty breaks above the downward channel with a volume spurt, we can shift the market status to a confirmed uptrend. Any decline below the 20 DMA will be negative, and the index can resume its downtrend.

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