Charts indicate further upward journey

Contrary to expectations, the equities opened positively and closed higher on Monday as NSE Nifty gained by 84.05 points or 0.46 per cent. The FMCG and PSU Bank indices were the top gainers with 1.14 per cent and 1.13 per cent. The Bank Nifty, Auto, and IT gained by more than a half per cent. All sectoral indices closed positive. The market breadth is positive as the advance-decline ratio is at 1:24. About 92 stocks hit a new 52-week high, and 61 stocks traded in the lower circuit. Tata Motors, HDFC Bank, and DLF were the top gainers in terms of value.

The Bank Nifty made a new lifetime high, and the Nifty closed above the prior day’s high. Though the Nifty witnessed some profit booking in the late session, it closed above the first hour’s range.

Interestingly, the India VIX also rose by 2.22 per cent. Volumes were lower than the previous day. As the Nifty formed a long-legged candle, it is better to be cautiously positive. Only a close below today’s low of 18,287 points will be negative for the direction. At this swing, high, with a slow momentum, and low VIX are not good signs. A sustained low VIX period for a longer period hints at some challenges for the bulls.

Even on the bullish closings, the Elder impulse system has formed another neutral bar. The upper Bollinger band shows an extension of the trend and expects a consolidation. The MACD line is not showing any increase in momentum. The Nifty closed at the highest level after December 20, 2022. During the current upswing, many bearish patterns and signals failed to get confirmations. This time too, only on confirmation of reversal, we assume that the index has made an intermediate high. Until then, be with a positive bias. As mentioned earlier, a close below the prior bar low will be the first sign of weakness. Only a close below 18,055 level, which is a minor low, is an indication of a trend reversal. Stay cautious and maintain strict stop losses.

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