Low volume rally is a little suspicious in nature

The equity benchmarks continued the rally closed higher for the seventh successive day. The NSE Nifty reclaimed the 18308 level with 52.35 points or a 0.29 per cent gain. The Bank Nifty and Fin Nifty traded weak on Monday with 0.40 per cent and 0.24 per cent declines. The Nifty Auto index is the top gainer with 2.05 per cent. The Energy and Realty indices were up by 1.27 per cent each. The remaining indices inched up by half a per cent an average. Volatility index VIX advanced by 1.27 per cent and settled at 16.76. The market breadth is positive as 1258 advances and 821 declines. About 217 stocks hit a new 52-week high, and 205 stocks traded in the upper circuit.

The Nifty closed above 18,300 and the previous day high. It tested the support line of the channel on a 75-minute chart. The Nifty lost its strong momentum by trading in a very tight sideways zone. It is evident in daily and hourly timeframes. At the same time, the index has formed a higher high and higher low candle, which signifies the bullish strength. The supports further inched up to the 18200-210 zone. The Nifty's lifetime closing high is at 18477, just another 169 points away. For the last three days, the intraday move is not giving any clear directional trade as the index is trading in a range after opening with a positive gap.

During the current upswing of 19 sessions, the Average True Range (ATR) is coming down. On December 21, the ATR is at 279 points and currently declined to 201 points. This shows a strong momentum is waning. Except for one or two days, the volume is below average during this upswing. Today, the Nifty futures recorded almost 40 per cent less volume than the previous day. This low volume rally is a little suspicious in nature. As long as the 18225 is protected, stay with a bullish bias. In any case, the Nifty closes negative on Tuesday, and it may be a first sign that the swing is matured. But, we need to get the confirmation for a bearish view. Otherwise, continue the long position as long as Nifty trades positively and make new high bars.

(The author is financial journalist, technical analyst,

family fund manager)