Wait For A Decisive Directional Bias

As expected, the outcome of Maha elections has had a positive impact on market. Nifty opened with a huge gap up and formed an evening star candle, an indication of exhaustion of the move. It recorded the highest volume after March15

The equities rallied for the second successive session. NSE Nifty is up by 314.65 points or 1.32 per cent and closed at 24,221.90 points. All the sectoral indices closed positively. The PSU Bank index is up by 4.16 per cent and is the top gainer. The Oil and Gas, PSE, and CPSE indices gained over 2.5 per cent. The Realty, Bank Nifty, Infra, and Small-cap indices rose over two per cent. The other sector and thematic indices registered decent gains. The market breadth is positive as 1,951 advances and 874 declines. About 77 stocks hit a new 52-week high, and 163 stocks traded in the upper circuit. HDFC Bank, BSE, Voltas, Reliance, and Kalyan Jewellers were the top trading counters, in terms of value.

The Nifty rallied 1,088 points or 4.68 percent from the last Thursday’s low. This two-day massive rally has to move above the 6th November high of 24,537 to reverse the trend and confirm the downtrend is over. As expected, the outcome of the Maharashtra state elections has had a positive impact on the market. The Nifty opened with a huge gap up and formed an Evening Star candle, is an indication of exhaustion of the move. It closed below the open and recorded the highest volume after the March 15. Seventy per cent of sessions’ volume was recorded in the last hour. But the price is in a narrow range, a little over 50 points at this hour. The Nifty closed above the 20DMA, and the MACD has given a fresh bullish signal. The RSI is above the prior high and 50 zone. Now, the question is, will this rally continue?

The Nifty has completed its Category-1 correction of 11.47 per cent. Last week, it took crucial support from the 50-week average and formed a strong bull candle with higher volume, indicating the possibility of reversal. If the Index can form a higher high above 24,538 points, it is a sign of trend reversal. As long as it holds the recent low of 23,263 points, expect a base to form. It should form a higher low above the previous low. A breakout above the 24,538 will confirm the reversal on the upside. The Nifty IT index is at a new high and may lead the market from now. The BFSI sector will also play a major role in the next phase of market recovery and rally. Wait for decisive directional bias for the fresh long positions to build the portfolio.

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