Daily MACD indicates fresh buy signal
Even though Nifty negates previous bearish implications by closing above prior high, there are some cautions available at the current level
The benchmark indices rallied further and reached near the previous swing high. NSE Nifty closed at 18070.05 with 133.70 points or a 0.75 per cent gain. The Metal index is up by 1.28 per cent. Nifty IT and Realty indices closed slightly lower. The Fin Nifty is up by 0.91 per cent, and FMCG and Bank Nifty are up by 0.75 per cent each. The market breadth is at 1:1 as 992 advances and 902 declines. About 125 stocks hit a new 52-week high, and 107 stocks traded in the upper circuit.
The Nifty has cleared the 17792 resistance and closed above the 18000. It once again opened with a gap up and sustained till the end and closed near the day's high. By closing above the prior high, the Nifty has negated the previous bearish implications. It also negated the probable double-top pattern. The RSI is in a strong bullish zone. The daily MACD has given a fresh buy signal by moving above the signal line. On the face of it, there are no weakness signs. The index is just arm's length from the prior swing high.
However, there are some cautions available at the current level. The index has moved higher, the RSI much below the previous high. This divergence needs confirmation. The daily trading ranges are shrunk. Indecisive small-range candles on intraday charts are not giving any strong entry signals. Except for the Metal index, none of the sector indexes gained much. The index is still in the lagging quadrant, as the RRG RS and momentum are below 100. The volume is still below the average.
These concerns are only cautioned, not the signal for a bearish view. The index rallied 19.13 per cent or 2904 points from the 17th June low and 5.37 per cent or 922 points from the 29th August low. As we expected, after five days of the inside movement, the impulse move met the target. Now, a move above 18115 will continue the rally. Only a move below the 20DMA (17698) gives weaker signals.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
