Cash volumes are a concern
The stock market registered a new lifetime high close during the week. The Nifty is just 0.5 per cent away from its lifetime. The interesting fact is, the benchmark index formed two identical hanging man candles for consecutive days. The adage "Sell in May and Go Away" has become obsolete this time. In fact, the Nifty advanced by 706.75 points or 4.83 points during this month. On a weekly basis, in the last five days it up by 431.8 points or 2.90 per cent. The Bank nifty closed with a 1.18 per cent gain. The nifty IT index rallied for the second day by 1.14 per cent. All other sectoral indices registered 0.16 to 1 per cent gain. The Realty index is down by 1.19 per cent and Pharma, Energy indices closed negatively by 0.19 per cent and 0.13 per cent. The market breadth is positive as 1024 advances and 893 declines.
Nifty formed a 66-day cup pattern during the consolidation period. As mentioned earlier, the Nifty met 50 per cent of an ascending triangle breakout target, which was triggered on 18th May. It formed an indecisive bar of long-legged small body candle at a lifetime high is not a convincing move. At the same time, this volume move is lacking the conviction on the bullish bias. All the technical indicators are showing bullish strength because the price closed at a new high.
The RSI is in a bullish and above the consolidation. All short and medium-term averages are trending up. It is not wise to look at the indicators at the current juncture. But, look at the ADX, which shows the trend strength, which lies at 13.55. On 16th February, at the previous lifetime the ADX is at 32.32. At the same level, the same trend strength indicator is at just 13.55, less than half. Apart from that, the cash volumes are a concern. The institutional participation was limited. There are several puzzling moves during the last 66 days. As there is no bearish signal, and only an indecision move, be with a positive bias with prior bar low as a trailing stop loss.
(The author is financial journalist, technical analyst, family fund manager)