Nifty forms a strong bullish candle
Concern is that index has formed an inside bar which is an engulfing candle too
On a weekly expiry day, the benchmark indices advanced by over half a per cent. Nifty closed at 16628, with 105.25 points or a 0.64 per cent gain. The rally is mainly led by Reliance, up by 3.45 per cent and the IT sector stocks. The Nifty IT is up by 1.82 per cent. Metal and Media indices are also up by 1.3 per cent. The energy index is the top gainer with 2.01 per cent upswing. Bank Nifty and Fin Nifty closed with a 0.3 per cent decline. The market breadth is positive with 1315 advances and 757 declines. About 29 stocks hit a new 52 week high, and 126 stocks traded in the upper circuit. Reliance, Adani Power and Raymond were the top trading counters on Thursday in value terms.
The Nifty has been consolidating for the last three days, after moving almost 5 per cent in just three days. In the last five sessions, the Nifty is up by 458 points or 2.83 per cent. This big move happened only in just two days. After two indecisive and bearish candles, on Thursday, it has formed a strong bullish candle. But the concern is that the benchmark index has formed an inside bar. The Nifty has formed the second inside bar in the last four trading sessions. It is also an engulfing candle.
The current price pattern on a 75 minutes chart is like a bullish flag. It reached the resistance level. A close above 16650 will be a breakout of a bullish flag. The concern is the volume declining over the last two days. Because of expiry on Thursday, the volume is a little higher. In fact, volumes are lower in the consolidation period. The flag breakout must attract a higher volume; otherwise, the breakout may not sustain for a longer period. The broader market and index breadth are still not so great now. On Thursday, the rally is mainly due to the rise in Reliance and IT stocks. The 50DMA is still 1.45 per cent away from the price. It is still below the 38.2 per cent retracement level (16644) of the prior upswing. A decisive close above 16644-50 can test the 16885. We can project more than that for now. But, a close below 16500 will resume the downtrend. For now, be cautiously optimistic for this weekend.
The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)