Avoid shorting above 18,055 pts

Rebound took place in the global market on Friday as the investor sentiment in equity markets was changed to bullish. The domestic equities erased all the previous day’s losses and closed at a new high. NSE Nifty gained by 195.40 points or 1.08 per cent and closed at 18,264.40 points. Only PSU Bank index Media indices closed negatively with 0.93 per cent and 0.60 per cent loss. The Nifty Auto is the top gainer with 1.79 per cent. The Bank Nifty and FinNifty gained by 1.45 per cent each. All other sectoral indices were by over half a per cent at an average. The Advance-Decline ratio is positive at 1.51. About 95 stocks hit a new 52-week high, and 68 stocks traded in the upper circuit. HDFC Bank, ICICI Bank, and HDFC were the top trading counters today in terms of value.

The Nifty has crossed the last Thursday’s high, with an over 200 points rally. It erased all the losses of Friday and negated the bearish candle’s implications. It closed at swing recorded on December 30, 2022. But the cash volume was recorded less than the previous day. For the last four days, volumes were below average. The Nifty has been trading in the 18065-18265 range for the last five days. As it closed at the upper band of the range, expect a breakout will result in a sharp move on the upside towards 18,474 points. Only if it breaks below 18,055 will we see serious profit booking. Within this zone, stock-specific activity will continue.

The RSI is at 68.28, which developed a minor negative divergence. MACD histogram is flat and shows stagnation in momentum. The index closed at the upper Bollinger band. Currently, the index is trading 2.33 per cent above the 20DMA. On Thursday, it was 2.68 per cent above the 20DMA, which shows that Friday’s fall created some more space to move higher. For now, it is better to avoid shorting opportunity as long as it trades above 18,055 points. Only below the range will be negative.

(The Author is chief Mentor, Indus School of Technical AnalysisFinancial Journalist, Technical Analyst, Trainer, Family Fund Manager)