Sutaining low volume breakout a big concern
image for illustrative purpose
With the broad market participation, the stock rallied over one percent for the second consecutive day. The auto sector was in the limelight today. The Nifty closed at 15,108.10, up by 184.95 points or 1.24 per cent.
The Nifty auto index is the top gainer with 3.22 per cent. The BankNifty and the FinNifty surged up by 1.38 per cent and 1.48 per cent respectively. Nifty midcap -100 and smallcap-100 indices grew up by 1.83 per cent and 1.59 per cent respectively. The pharma and FMCG indices ended with 0.19 per cent in the negative zone. The market breadth is positive as 1,204 advances and 710 declines. India VIX further declined by 1.87 per cent.
The Nifty, for the second consecutive day, opened with a big gap and closed above the prior swing high. It also cleared the downward channel resistance line. It mostly traded in the first half range and maintained the gains till the end. Even though it traded in a range, as the gains were protected and closed near the day's high, the bullish strength remained strong.
The benchmark index gained 432.35 points or 2.95 per cent in the last two days with low volume. In the derivatives segment, the open interest also not up as much as it desired. Generally, sustaining the low volume rallies is very difficult. The PCR is at 1.51 is higher.
Interestingly, the price is not fallen much today, but the long exits happened between 15,140-15,150 range. This shows the profit booking occurred in this range, and a majority of smart money is out of the market.
A gap up has not given many trading opportunities in the indices. As a result, the option premiums melted like ice, in the afternoon session. There is a slight negative divergence visible on an intraday chart (15 minutes). Even the MACD histogram turned negative. At the same time, there is no weakness in the daily chart. The only concern is the sustenance of low-volume breakout. Try to be light in position size for now. Intraday opportunity may not be so easy for now.
(The author is financial journalist, technical analyst, family fund
manager)
