Nifty still in neutral zone
The inverted Head and Shoulders pattern on a 15-minute chart has met its target, Nifty traded mostly in 17380-433 zone
Weekly expiry may increase the volatility further; The current bullish reversal has to sustain above the 50DMA and needs to cross 20DMA to continue the upswing
The benchmark index Nifty opened with a 100 point gap-up and then continued to trade higher for the rest of the trading session. It gained by 197.05 points or 1.14 per cent and closed at 17463.80. Only the PSU Bank index declined by 0.62 per cent. The Auto index is the top gainer with 2.19 per cent.
The Metal and Bank Nifty up by 1.86 per cent and advanced by 1.86 per cent and 1.53 per cent, respectively. IT and Midcap-100 indices were also gained 1.34 per cent and 1.14 per cent. The other sector indices gained 0.5-1 per cent. The market breadth is positive as 1145 advances and 903 declines. About 49 stocks hit a new 52-week high, and 135 stocks traded in the lower circuit. In the derivative segment, 156 stocks were advanced, and 32 declined. The technology sector stocks show a maximum long built up and the energy sector stock show maximum short built up.
The market bounced as expected above the 17420-446 zone. It just closed above the 50DMA. It opened with a positive gap and sustained the gains. The benchmark index, Nifty, traded mostly 17380-433 zone. But, in the last hour, the range was broken and closed near the day high. As mentioned earlier, the inverted head and shoulders pattern on a 15-minute chart has met its target.
The next level of the target is placed at 17507. The 20 DMA is at 17640, where it may have testing times. The index closed above the previous day's Doji high got confirmation of the bullish reversal. Above 20DMA, the prior swing high is at 17794. The current bullish reversal has the challenge to sustain above the 50DMA and needs to cross 20DMA to continue the upswing.
The sector participation and improved market breadth are giving signs of buying interest generated at lower levels. But the concerns are still present, like the lower volume on the rise. On an over one per cent rising day, the Open Interest up by just 0.31 per cent, which shows that the rally is not supported by buying interest. The short-covering led the rally on Wednesday, as the Bank Nifty shows a maximum short covering.
The Bank Nifty up by 1.53 per cent, but the Open Interest declined. On a 75 minutes chart, the MACD line is still below the zero line. The daily RSI is below the 50 zone. Importantly, the weekly expiry may increase the volatility further. The Nifty is still in the neutral zone with a positive bias. We can't take the short positions at the current level unless the index closes below the prior day low.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
