Pullback rally may continue

The market tried to come out of an oversold position with the help of IT and Metal stocks. The NSE Nifty gained by 83.45 points or 0.43 per cent and closed at 19,393.60 points. The Nifty Metal and IT indices are up by 1.30 per cent and 1.09 per cent, respectively. PSE and CPSE indices are also up by over one per cent. The Media and PSU bank indices were the only losers on Monday. The India VIX is down by 1.50 per cent and closed at 11.96. The market breadth is positive as the advance-decline ratio is at 1.51. About 122 stocks hit a new 52-week high, and 100 stocks traded in the upper circuit. Adani Enterprises, Jio Financial, and HDFC Bank were the top trading counters in terms of value.

The Nifty closed above the previous day’s high. Friday’s Doji candle got the confirmation for its bullish implications. It once again took support at 19,300 points and bounced. The 50DMA has been acting as support for the last five days. Now the support zone has gone up to 19,300-318 zone. As we projected, the pullback is a reality now. Currently, it closed 0.39 per cent above the 50DMA. If the bounce continues, the immediate resistance is the sloping channel supply line, which is around 19,450 levels. Above the 20DMA of 19,668 is another resistance. We cannot project more of this on the upside because Monday’s bounce did not attract the volume. Normally, a low-volume price rise may sustain for a long period.

On the indicators front, the MACD line closed just on the zero line with a declined bearish momentum. The RSI is in the neutral zone. The Elder’s impulse system has formed a neutral bar. The Anchored VWAP resistance is also placed just above the 20DMA. The index closed in the moving average ribbon on an hourly chart, and the MACD line is still below the zero line. This is another factor raising doubts about Monday’s bounce. In any case, the Nifty closes above 19,426 points, which is Monday’s high, is positive and can test the 19,490-660 zone of resistance. Stay neutral on the direction for now, and wait for the decisive breakout.