Tuesday's close holds key

Another day of positiveness and over 100-point gain with support from pharma and metal stocks. Nifty closed at 14942.35 with a 119.2-points gain. All the sectoral indices closed in the green territory. As we expected, the broader market, especially small caps, outperformed the benchmark indices. The Nifty Smallcap-100 index up by 1.53 per cent. Nifty Metal index up by 3.14 per cent, and the Pharma index rose by 2.8 per cent. Media up by 2.53 per cent, and Auto, Energy, Infra, PSU Bank indices advanced over one per cent. The market breadth is positive as 1344 advances and 612 declines. India VIX further declined by 2.87 per cent. Over 200 stocks hit a new 52-week high, and 220 stocks hit the upper circuit today.

Finally, Nifty closed decisively above the 14880 resistance. It opened with a gap-up and sustained the gains till the end. For the first time, it has broken out of the slopping channel on a closing basis. On a daily chart, the current price pattern looks like an inverted head and shoulders, which is a bullish structure. It exactly closed at 61.8 per cent retracement level of the fall. Another positive close above 14944, is a confirmation of the reversal. Now, it is trading above all short-term averages. Currently, Nifty is 1.41 per cent above the 50DMA and 2.34 per cent above the 20DMA. It is also above the anchored VWAP resistance. The Elders impulse system has given a buy signal.

Pring's KST, too, has given a buy signal. However, there are some concerns about the market's move. The daily range further shrank to less than 75 points. It formed an identical candle-like Friday. Trend strength indicator ADX is further declined. +DMI yet to make a new swing high. As we expected, the RSI reached near to the resistance line of 58. A close above this level will give further strength to the market. Tuesday's close is important for the market, as it requires a follow-through day for bullish confirmation.