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Nifty regains on short covering

The market rebounded after significant fall yesterday as the November expiry in place.

Nifty regains on short covering
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Nifty regains on short covering

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The market rebounded after significant fall yesterday as the November expiry in place. After opening little higher, the Nifty drifted down to below the previous day low. It sharply recovered in the afternoon session as the short covering in full swing. As the rollovers are lower than the previous months, the trend may be halted for now.

The Nifty inched up by 128.6 points or one per cent. Barring Energy, all the sectoral indices closed higher. The metal index was outperformed as it gained by 3.85 per cent. Bank Nifty higher by 1.21 per cent. All other indices closed higher by less than a per cent. Overall market breadth was in favour of advances. About 60 stocks hit their new 52 –week high today, including index stocks Hindalco and Jindal Steel.

The Nifty did not get a confirmation for yesterday's bearish engulfing. Like earlier two swings, this time also it is elusive. As I mentioned yesterday, every swing high formed with a bearish engulfing and did get the confirmation. The only difference this time is, it made a lower low. It formed a hammer pattern. Technically, as it formed near to the confluence of highs, it can be categorised as a hanging man. The Nifty gained by 1344 points in November series. It gained almost 200 points form the day's low. As we expected, the Nifty crossed 13,000 levels once again. On the indicators front, the RSI has made two lower highs and two lower lows, which is giving negative signals to the market. Short covering was in full swing as the November expiry in place. The rollovers stood at 71.48 per cent, which lower than three and six-month average. This indicates traders are not sure of the rally to continue further.

The MACD histogram further declined very near to zero line. The upper Bollinger band started flattening is also an indication of the probable sideways or consolidation in the near term. For Friday, 12908 will act as critical support and 13,080 will act as a resistance. Either side of the breakout will result in the resume or reverse the trend.

The author is a Financial Journalist, Technical Analyst, Trainer, Family Fund Manager

T Brahmachary

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