Stay Highly Cautious About Current Trend

NSE Nifty continued to face strong resistance around 24,360 points. After a volatile week, the Nifty closed with 307.70 points or a 1.28 per cent gain. BSE Sensex is up by 1.63 per cent. The Midcap gained by 0.25 per cent, and the Smallcap index is down by 0.63 per cent. The Realty index is the top gainer with 2.58 per cent, followed by Auto with 1.33 per cent. The IT and Bank Nifty are up by 0.93 per cent and 0.83 per cent. The Media is the top loser with 1.71 per cent, followed by Consumer Durables with 0.97 per cent. The India VIX is up by 6.41 per cent to 18.25 per cent. The FIIs continuously bought the equities. They bought Rs2,769.81 crore in May, and the DIIs bought Rs3,290.49 crore worth of equities.

The Nifty faced strong resistance around the 24,360-400 zone. On Friday, it faced resistance at the 61.8 per cent retracement level of the prior fall, and fell sharply. It formed a Shooting Star candle. Last week’s Shooting Star candle failed to get the confirmation for its implications. The volumes were less than last week. However, the undertone of the market is not showing any weaker signals. The institutional buying gained momentum over the last two weeks.

The Indo-Pak, geopolitical tensions remain a risk factor for the market. Due to this, the volatility index India VIX is rising for the last weeks and touched 18.25. This shows that they are enough risk-averse hedged positions were built in the market.

Technically, the index formed a higher high and higher lows. The short-term average 8EMA is acting as strong support for now. It sustained above the 200DMA, which is at 24,050 points. It is the near-term support. Once the 200DMA enters into an uptrend, expect the market rally to continue. Though it closed below its previous week, strong buying support protected the fall. The index is above the 40 and 50-week averages. The 50-week average is at 23,962 points, which will be the crucial support. The 30 and 40-week averages are still in the downtrend. All the long-term averages must be in the uptrend for a strong uptrend.

The weekly RSI is in the neutral zone and above the prior high. There is no divergence visible. The MACD is strongly bullish. However, the daily MACD histogram shows a decline in momentum due to range-bound trading.

If the Nifty is able to close decisively above the 24,400-545 zone with high volume, expect to test 25,300 faster. If it closes below the 24,050-23,962 zone of support, it immediately tests 23,800 points. Stay highly cautiously optimistic on the trend and a stock-specific approach is needed.

(The author is partner, Wealocity Analytics, Sebi-registered research analyst, chief mentor, Indus School of Technical Analysis, financial journalist, technical analyst and trainer)