Continue long positions with trailing stop loss

The equity market rallied for the second consecutive day with the support of broader market participation. The NSE Nifty gained by 112.15 points and closed at 15834.35 points. Barring IT and pharma, all the sectoral indices closed with decent gains. The Metal and the Bank Nifty up by 1.16 per cent each. The realty index advanced by 2.73 per cent. FinNifty also closed with 1.05 per cent. All other indices closed with half a per cent gain at an average. The market breadth is positive as 1335 advances and 655 declines. About 268 stocks hit a new 52 week high, and 248 stocks traded in the upper circuit.

The market maintained the opening gains and given a confirmation to Friday's hammer. The Nifty closed above the 20DMA after three days. It closed near to the day's high. The upper Bollinger band (15880) and the resistance are almost at the same level, at just 50 points. As the Bollinger bands contracting, a close above this resistance will lead to an impulse move. Today's move was achieved in the first two hours, and later it consolidated on the upper band. The RSI reached downward channel resistance. The histogram shows the decline in the negative momentum. The breadth is positive, and the volume is a little lower. The Nifty futures registered a freak trade at 16,546.50 points. The PCR increased from 1.27 to 1.32. The VIX further declined to 12.0675. The At The Money (ATM) Implied Volatility (IV) is at a historically low at 9.47. This lowest volatility will lead to sharp price movements in the short term. As the Nifty closed near the upper band, it was wise to continue the long position with a trailing stop loss. We need to wait and watch the new high will come with a higher volume of support or not. A move below 15,760 points we may see the weakness.

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