Nifty forms another higher high, higher low candle

The equities rallied further in the absence of selling pressure. The Nifty closed at 17525.10 with 127.60 points or a 0.73 per cent gain. The Metal index is up by 1.29 per cent, and the private banks index is gained by 1.23 per cent; they are the top gainers on Monday. The Nifty IT and PSU bank indices are down by 0.02 per cent and 0.45 per cent, respectively. All other sector indices are up by 0.10 to 0.90 per cent. The Market breadth is positive as 1020 advances and 873 declines. About 58 stocks hit a new 52-week high, and 98 stocks traded in the upper circuit. SBI, Reliance and HDFC Bank were the top trading counters on Monday. The India VIX rose by 2.05 per cent to 19.30.

The Nifty negated the inside bar's bearish implications by closing above Thursday's high. It formed another higher high and higher low candle. The rally is driven by Metal and Private sector banks. As Tuesday is a holiday, the traders have not shown interest in building up the positions. The lowest volume in the last two months has been recorded on Monday. The Nifty has not breached the prior day low and has not given any kind of weaker signal. As it closed above 17491, the targets are open towards the 17625-700 zone.

There is a suspicion about the rally on the low volume. The momentum also declined for the fourth day. The strong price action on low volume and declined momentum are not trustworthy. On a 75-minute chart, the RSI and MACD lines decline when the price moves higher. This negative divergence also gives some weaker price internals. It needs confirmation for the bearish implications by closing below the prior day's low. For now, the 17286-264 zone of support is the key level. As long as the Nifty trades above this zone, be with the price trend.

(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)