With part recovery, Nifty sends 'buy' signals

WITH the relief rally from the key support level, the Nifty reclaimed the 14,500 level. It gained by 214.90 points or 1.5 per cent. The BankNifty, FinNifty and the Metals rallied over three per cent today. Barring IT and Pharma all the sectoral indices closed with over one per cent gains. With TCS disappointment, the IT index fell by 2.89 per cent. The Nifty Pharma index declined by 0.94 per cent. India VIX was down by 11.67 per cent. The overall market breadth was positive as 1,376 advances and 523 declines were recorded.

The Nifty recovered 215 points of yesterday's fall and closed near to the day's high. It took support at 100DMA for the second consecutive day and closed above 20-weekly moving average. As we expected, it formed an inside bar. This is the sixth time, the Nifty has formed an inside bar since February high. Every time it formed an inside bar, the positiveness continued for a maximum of three days. As tomorrow is a holiday, the next two trading sessions may extend the positiveness and may try to fill Monday's gap. But, as long as it trades below the 50DMA, 14,836, the market consolidates further above the 100 MA. For the near future, the consolidation will continue between 14,282-836 zone. The sector rotation was perfectly done today. The Pharma and IT indices were down and the Monday's beaten-down sectors BFSI and Metals protected the market from further fall. On a 75 minutes chart, the MACD is about to give a buy signal.

Other than this none of the indicators shows the bullish bias. There is no positive divergence visible. As tomorrow is a holiday for the market, most of the shorts were covered today. The derivative data shows the decline in open and indicates the same. Even the Banknifty rose by over 3 per cent, but the open interest declined by 2.65 per cent, is a sign of short covering. Let us wait for a weekly close to get clarity on near term trend.

(The author is financial journalist, technical analyst, family fund manager)