Mkt in overbought zone, but not deterrent to trend

The market scaled a new high with another big bullish session on Monday. It registered the sixth straight positive close. The Nifty closed at 15,582.80 with 147.15 points or a 0.95 per cent gain. The Reliance and metals rally are the main drivers of today's uptick. Reliance up by 3.13 per cent, and the Metal index advance by 2.10. Barring Media, Auto and IT indices, all the sectors closed in positive territory. Bank Nifty, Fin Nifty, Realty, Energy and Infra indices up by over 1.10 per cent. India VIX is further down by 2.97 per cent and closed at 16,885 level. The overall market breadth is positive as 1,094 advances and 882 declines. 145 stocks hit a new 52-week high, and 163 stocks hit the upper circuit today.

The Nifty formed a big bull candle after the breakout. It is not in a mood to retrace immediately. The 127.6 per cent retracement level of 15600 will be a target or a resistance for now. It closed at the day's high. As all the heavyweight stocks rallied, the benchmark index scaling new highs. There are no negative divergences on any time frame. MACD about to give a fresh buy signal on a weekly chart.

Friday's Evening star pattern was invalid now, as the price closed much above to it high. As a result, it negated all the bearish implications. The daily and intraday momentum has gradually picked up today. As longs as the Nifty trades above the breakout level, be with a positive bias. The overbought condition on a lower time frame can't be treated as a weak signal. It may lead to a profit booking, but may not influence the trend. A close above 15,600 is another breakout of critical resistance. After the breakout, a strong bull candle indicates strength in breakout. The probability of retesting is very low for now. Currently, the Nifty closing positively for the sixth straight. The rally may extend for another two to three days. In the recent past, the Nifty swings are limited to eight to 10 days. Let us be with the trend, as long as it gives a reversal sign.

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