Investors can stay bullish as Nifty is exuberant

The Indian equity markets continued to surge for the sixth straight session. Both the benchmark indices, Sensex and Nifty registered another record closing. The NSE Nifty closed with 191.55 points gain at 15,115.80. Barring PSU Bank and FMCG, all other sectoral indices closed positively. Auto and Metal indices were up by over three per cent. IT index advanced by 2.31 per cent.

The Banknifty was a bit nervous about moving higher and closed with a moderate 0.92 per cent gain. India VIX was up by 2.32 per cent and closed at 23.96. The broader indices Nifty Midcap-100 and Smallcap-100 indices moved higher by 1.5 per cent each. The market breadth was positive as 1164 advances and 746 declines were recorded. Another day of exuberance negated the bearish implications of one more pattern.

The market registered over 200 points gain three times in the last six days. It opened with a gap up and sustained the opening gains till the end. It traded at 100 points Intraday range, not given any Intraday trading opportunities. There are two gaps unfilled in the last six days. These gaps will act as important near term supports.

As mentioned earlier, as long as, the Nifty is making higher highs, be with the trend. In the last six days, market has moved over 11 per cent. But the daily ranges are shrinking. For the last two days, the momentum is clearly waning. On the 75 minutes chart, the MACD histogram sustained in the negative zone. The RSI on a daily chart, was still below the prior swing low, while the price is making new highs.

The trend strength indicator, ADX has flattened for the last few days on daily and hourly charts. Even the positive movement indicator +DMI is not making any swing highs. These are all signs of weaker strength or momentum. As the price is not giving any confirmation, it is better to approach the market with a cautious stand. A close below the prior low is the first sign of weakness. Now the support zone is shifted to 15,014-15,040 range. Only below this zone, the market may be weakened. Till then be with a positive bias.

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