Fresh buy signals on charts
The MACD histogram shows the solid bullish strength; the only concern now is that the Nifty moved in sideways in the last four hours, and the volume is lower than the previous day. These two concerns must be addressed the Tuesday otherwise, the trend will be a question
The domestic equities continued to rally for the third successive day with positive global markets. The Nifty rallied by 2.01 per cent or 328.70 per cent, and closed at 16681.15. The Nifty IT index led the market rally with a 4.08 gain and is the top performer on Monday. The Realty index is up by 3.27 per cent.
The Auto, Infra, Media, and service sector indices are up by over two per cent. The broader market indices, Nifty Midcap-100 and Smallcap-100 indices, are also up by 2.09 per cent and 2.49 per cent, respectively. All other sector indices are up by one per cent on average. The market breadth is positive as 1569 advances and 531 declines. About 31 stocks hit a new 52 week low, and 186 stocks traded in the upper circuit. Reliance, Infosys, and Adani Power were the top trading counter in value terms.
As we expected, the Nifty filled the 5th May gap. It has broken an ascending triangle pattern and closed near the day high. The Nifty also closed above the 38.2 per cent retracement level of the prior downtrend. As the Nifty broke the base on the upside, it may trade positive for another 2-3 days. It will attempt to move above the 50DMA, currently at 16904. The Nifty has broken the three weeks range decisively.
Now, the only way to trade is to be with the trend. The last three days of positive gap openings and closing at the day high is an indication of the trend strength. The 50 DMA flattened and is currently at the 50 per cent retracement level of the prior trend. The RSI has moved above the 50 zone and looking very strong. The MACD histogram shows the solid bullish strength.
The TSI and the KST indicators have given fresh buy signals. It moved 2.5 per cent above the 20DMA and just 1.52 per cent to the 50 DMA. The Nifty closed near the Anchored VWAP (16717) resistance. The Elder impulse system has formed a bullish bar for the second successive day. As we forecast, the Nifty IT sector has led Monday's rally.
The VIX is further down to 20.33. The only concern now is that the Nifty moved in sideways in the last four hours, and the volume is lower than the previous day. These two concerns must be addressed the Tuesday; otherwise, the trend will be a question. For now, be with positive bias. Only in case the Nifty closes below the prior bar low does the trend resume on the downside.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
