Can the rally sustain amid bearish concerns

The domestic equities erased Thursday’s losses and rallied towards the new high. NSE Nifty closed at 18,826pts with 137.90 points or 0.74 per cent gain. The Bank Nifty and FinNifty led the market rally with 1.14 per cent and 1.19 per cent gains, respectively. Only Nifty IT and Realty were the losers, with 0.38 per cent and 0.21 per cent respectively. All other sector indices gained by 0.40 per cent to one per cent range. The advance-decline ratio improved to 1.74. About 142 stocks hit a new 52-week high, and 76 stocks traded in the upper circuit on Friday. HDFC, Reliance, and Mazdock Ship Builders were the top trading counters on Friday.

The Nifty almost tested an all-time high on Friday. It rallied to 18864.70 level, just 22.9 points below the previous all-time high. At the same time, it closed above the previous week’s high and erased the last two weeks of bearish implications. The last week’s Shooting Star candle failed to get a confirmation for its bearish outcomes. During the current rally, the Nifty has not closed below the previous week’s low. Several indecisive and bearish bars failed to drag the market down. Every decline is used for a fresh buying opportunity. As we stated earlier, the bears will not get a chance to dominate the market, unless it closes below the prior swing low. The rally in the global markets also fuelled the sentiments. Now, only a close below 18,662pts will give early signs of weakness. The 8EMA support is at 18,693pts, and the 20DMA is at 18,563pts. Even the minor swing low is at 18,555pts. This zone of 18,555-693 is very important to continue the rally. There are increased chances of hitting a new lifetime high next week, any time. Above 18,888pts, the target is opened to 19,145 level.

Even though the indices are rallying towards new lifetime highs, there are concerns. The India VIX declined to below 11 to 10.84, which is the first worry for the market. Next, is a rise in the Dollar may lead to profit booking by FIIs. The majority of sectors are losing their momentum and relative strength, and no sector is in a position to lead the market. Stock and sector rotation is leading the market, not the broader market. On Friday, the 30 minutes of intraday fall with massive volume shows a serious profit booking happened. For now, staying with the trend is the only way to participate in the market. In the current scenario, risk management is the only way to protect the capital and profits.

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