Profit booking likely in 18,000-115 zone

The Indian market continued to rally to further highs and closed strongly. NSE Nifty ended at 17825.25 with 127.10 points or a 0.72 per cent gain. The Auto and Realty indices were the top gainers with 2.52 per cent and 1.97 per cent, respectively. Most of the sector indices closed with less than percentage gains. The Media and PSU bank indices are down by 0.30 per cent each. Nifty Midcap-100 index is up by 1.32 per cent, and the Smallcap-100 index is up by 0.95 per cent. The market breadth is positive as 1,127 advances and 758 declines. About 88 stocks hit a new 52-week high and 87 stocks traded in the upper circuit. Zomato, ICICI Bank and HDFC AMC were the top trading counters on Tuesday.

The Nifty opened with 99 points positive and sustained above the gap. It traded in a narrow range of just 75 points. It just closed above the sloping trend line resistance. As we forecasted, the Nifty reached 17800, and now 18000-18115 is a crucial level to cross. The RSI is at an extreme band at 82.22. Though the index closed at the near swing high, the RRG relative strength and momentum have declined on Tuesday. Even the Mansfield Relative Strength indicator is below the zero line. The daily MACD histogram also shows a decline in momentum. On Tuesday the lowest volume was recorded after 17th January.

Currently, the Nifty closed just below the 78.6 per cent retracement level (17872) of the whole downtrend. As mentioned earlier, the nifty may face a profit booking at 18000-115 zone. Before that, 17872 may act as immediate resistance. On a lower time frame, the negative divergences are still present. On a 75-minute chart, the histogram is just on the zero line, showing a lack of momentum. The daily range also shrank to just 75 points, which indicates tiredness. But, still, there are NO weakness signs in any time frame. Only a close below the prior bar low will give us an initial weakness signal. There are several gaps to be filled in this upswing. Let us be cautiously optimistic and continue with the trend. Keep protecting the profits with a trialing stop loss. Around 18000-115 will be a crucial resistance zone and not an easy task to cross.

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