Time to book partial profits in overbought mkt
Monday’s candle is completely above the Bollinger bands and shows an overbought condition; Nifty may retrace towards upper Bollinger band, which is currently at 20,412 pts
image for illustrative purpose
Extremely Positive Market Breadth
- India VIX gained by 4.93%
- 1,679 advances and 865 declines
- 287 stocks hit a new 52-week high
- 144 stocks traded in the upper circuit
As expected, the equity benchmark indices rallied to the new highs with positive sentiment. The Nifty gained 418.90 points or 2.07 per cent and closed at 20,686.80 points. The Nifty Media and Pharma indices close with 0.78 per cent and 0.18 per cent declines. The Bank Nifty and FinNifty gained by 3.61 per cent and 3.23 per cent, respectively. The PSU bank index gained by 3.85 per cent. All other sector indices were gained by 0.50 per cent to 2.5 per cent. The India VIX has also gained by 4.93 per cent. The market breadth is extremely positive as 1,679 advances and 865 declines. About 287 stocks hit a new 52-week high, and 144 stocks traded in the upper circuit. HDFC Bank, ICICI Bank, Reliance, and Tata Tech are the top trading counters in terms of value.
The Nifty closed at another lifetime high with five State election results. The volumes were higher than the previous day. For the last five days, the volumes were recording above average. With today’s move, the index has reached an extreme level. Today’s candle is completely above the Bollinger bands and shows an overbought condition. The RSI is at 81.21, indicating an extreme condition. On July 20, when the Nifty formed a new high, the RSI was at 80.57. The index also closed above the 127.6 per cent retracement level of the prior downswing.
The weekly RSI is above the 70 zone. Even on the hourly chart, the RSI is at 91.41, which is an extreme possible zone. During the day, the index is moving higher, but the RSI flattened. In these conditions, the index may try to come out of an overbought condition. Nifty may retrace towards the upper Bollinger band, which is currently at 20,412 points. It is time to book partial profits and continue the remaining with a trailing stop loss.
(Chief Mentor, Indus School of Technical Analysis Financial Journalist, Technical Analyst, Trainer, Family Fund Manager)
