MACD indicating strong bullish momentum

After a massive move there is a probability of forming an inside bar on Friday, which maybe within Thursday’s range. The current weekly closing will give a directional bias. Thursday’s move has given the indication, about stronger market conditions. But, the concern is that Thursday’s rally with a negative market breadth, is creating doubts 

The benchmark indices hit a new lifetime high at 22,993.60 points. NSE Nifty registered a big upmove of 369.85 points or 1.64 per cent and closed at 22,967.65. Only the Nifty Pharma index closed negative by 0.52 per cent. The Nifty Auto and Bank-Nifty were up by 2.06 per cent and were the top gainers. The Fin-Nifty was up by 1.90 per cent, and the PSU Bank index gained by 1.72 per cent. The IT, Infra, and Realty indices also gained over one per cent. All other sector indices close with decent gains. The market breadth is negative as 1,368 declines and 1,250 advances. About 121 stocks hit a new 52-week high and 96 stocks traded in the upper circuit.

IRFC, Cochinshipyar, RVNL, HDFC Bank, and Mazdock shipbuilders were the top trading counters on Thursday, in terms of value.

The underperforming private banks led the market to hit a new lifetime high. It almost tested the 23000 level (22,993.60) and closed near to that for the first time in its history. As mentioned earlier, a close above 22,530 will lead to a new high, which was proven on Thursday. The upside targets are still open to 23,155 points. If the index sustains above 22,800 points, we will see this target before June 4, the Election results day. Thursday’s rally was with above-average volume. It formed one of the strong bullish candles in recent times. The index closed above the Bollinger bands, which is an indication of an overextended price rally.

The RSI shifted its range into the strong bullish zone and negated the bearish divergence. With an 1172-point rally in 9 trading sessions, the MACD shows a strong bullish momentum. The Relative Strength is also improved, compared to the Nifty-500. The rising channel’s resistance is at the 23,150 zone. A close above this level will result in a breakout. After Thursday’s massive move on a derivatives expiry day, there is a probability of forming an inside bar on Friday, which means maybe within Thursday’s range on the weekend.

As mentioned earlier, the current weekly closing will give a directional bias. Thursday’s move has given the indication, that the stronger market conditions. The RBI’s hefty dividend may boost the overall fiscal conditions, which is another reason for the bullishness on Thursday. But, the concern is that Thursday’s move of 370 points, with negative market breadth, is creating some doubts about the rally. As long as, it trades above 22800, be with a bullish bias.

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