Next week crucial for Nifty to move higher with velocity
The benchmark indices recorded fresh lifetime highs on Friday, with Reliance support. The Nifty closed absolutely flat at 15,923.4 with just 0.80 point decline. The Nifty Pharma, Metal and Realty indices gained over one per cent. The IT index declined by 1.07 per cent as profit booking at the weekend. The overall market breadth is slightly positive as 1,015 advances and 935 declines were recorded. The India VIX decline further 4.6 per cent today to 11.7050. About 212 stocks hit a new 52-week high, and 155 stocks traded in the upper circuit.
The market is hesitant to continue the breakout strength as it closed at an absolute flat note. With the last hour recovery, the Nifty escaped breakout failure. As we suspected about the conviction of a breakout, it missed a faster retracement. The tight flat base breakouts will result in more violent moves. The negative index's breadth and a decline in open interest is also showing the lack of conviction. At the same time, it has not closed below the breakout or a prior day low, and we cannot have a bearish view. As it made a higher high and higher low candle today, it is better to continue with the positive stance. But, the intraday chart shows a different picture. After a gap opening, the Nifty failed to move above the opening gains and made lower high bars. Even on a weekly basis, the Nifty closed above the previous week's high. The RSI also fails to close above the prior swing high at the weekend. The MACD histogram is still below the zero line. The derivative volume declined for the sixth straight session. As the volatility is at its historically low, the options premiums are trading at rock-bottom levels. Because of this, the Options volumes also declined. Next week is crucial for the market to either move higher with a velocity or register a failed breakout.
(The author is financial journalist, technical analyst, family fund manager)