Wait for a decisive move above 50 and 20DMAs
Indicator not changed much with Tuesday's move; MACD line still below the zero line; RSI is also below the 50 zone
image for illustrative purpose
On easing of Russia-Ukraine tensions, sharp recovery in global market futures has improved the sentiment in Indian stock markets. The benchmark indices opened positively and traded subdued for a few minutes. The US futures showed a sudden spurt at 11 am. The Nifty is up 500 points since then. The Nifty closed at 17352.45 with 509.65 points or a 3.03 per cent gain.
The Auto index is the top gainer with 4.01 per cent. Bank Nifty, FinNifty, IT, Media, and Infra indices advanced by over three per cent. All other sectoral indices are up by 0.8 per cent to 2 per cent. The VIX was down by 10.29 per cent. The market breadth is positive as 1448 advances and 623 decline. About 101 stocks hit a new 52 week low, and 218 stocks traded in the lower circuit. HDFC, Tata Motors and TCS are the top trading counters today.
The market recovered all the black Monday losses. It took support at 200DMA yesterday and filled the gap of the previous day. As we expected, after a move above 17100, it has sharply moved higher. With broader market participation and all sector rallies, the benchmark closed near the 20 and 50DMAs. The averages are placed at 17447 and 17466.
Above this resistance zone, the Nifty has to clear 17514, and 17640 (swing high) are the targets. As stated yesterday, the 20DMA fell below the 50DMA is a bearish sign for the market. Only above these levels the bearish implications will be negated. The Nifty may form an inside bar after two days of high voltage moves.
As long as the benchmark indices trade below 50DMA, it is better to stay in cash. In an uptrend, it has formed a higher swing. The Indicator has not changed much with today's move. The MACD line is still below the zero line. The RSI is also below the 50 zone. If we remove the last two days price action, which was influenced by geopolitical tensions, it is better to wait for a decisive move above 50 and 20DMAs.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
