Begin typing your search...

Overstretched condition only concern

As long as the index is protecting the prior day’s low, ride the trend and try maintaining a tight stop loss to protect the profits on the table

Overstretched condition only concern
X

Nifty closed at another new high, the highest closing being above 24,401 points. However, volumes declined further. As it closed near the day high, there is no weakness at all in the ongoing trend. The only concern is the waning momentum and the overstretched condition

Market Positive Breadth :

  • 1,397 advances
  • 1,316 declines
  • India VIX is up by 5%
  • RSI in overbought zone
  • 117 stocks in upper circuit
  • 175 stocks hit a new 52-wk high
  • MACD line extended from zero line

The equity benchmark indices rallied further and closed at a new high. NSE Nifty was up by 112.65 points or 0.46 per cent and closed at 24,433.20. The Auto index was the top gainer, up 2.23 per cent, followed by the Consumer Durable index, up 1.74 per cent. The Pharmaceutical Index was up 1.57 per cent. The PSU bank, Consumption, Real Estate, and Healthcare indices were up over one per cent. The IT emerged as a top loser with 0.20 per cent. Oil gas was down by 0.17 per cent. All other indices were up by less than a per cent. The India VIX is up by 5 per cent to 14.28. The market breadth is positive as 1397 advances and 1316 declines. About 175 stocks hit a new 52-week high and 117 traded in the upper circuit. RVNL, HDFC Bank, IRFC, and Maruti were the top trading counters on Tuesday, in terms of value.

The Nifty closed at another new high, the highest closing being above 24,401 points. However, volumes declined further. As it closed near the day high, there is no weakness at all in the ongoing trend. The only concern is the waning momentum and the overstretched condition. The index is now 5.88 per cent above the 50DMA, showing an extension from the average. longer the distance from the average, is prone to reversion to the mean. Now, the index is 2.51 per cent above the 20DMA. On Tuesday, the Auto and Consumer Durable led the market rally. Barring Oil and Gas all the sectors participated in the rally. As stated earlier, as long as the index is protecting the prior day’s low, ride the trend. In all time frames the RSI is in the overbought zone. The MACD line extended from the zero line. The indicators can continue in overbought condition for a period. If the shift in the range from over-bought to the 60 zone, will give some clues about the future direction. Try to maintain a tight stop loss to protect the profits on the table.

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

T Brahmachary
Next Story
Share it