Technical charts signal bullish bias

Ledby private banks, and Reliance, the Nifty closed at a nine-month high. It gained by 525 points or 2.09 per cent last week. The BSE Sensex is also up by two per cent. The Midcap-100 index is up by 2.40 per cent, and the Smallcap-100 advanced by 4.30 per cent. The Metal index is up by 4.81 per cent, followed by Media, which is up by 4.36 per cent. The Consumer Durables, Energy and FinNifty also gained by 3.40 per cent to 2.61 per cent. On the flipside, the Realty is down by 1.94 per cent, and the IT index declined by 0.43 per cent. The India VIX is down by 9.40 per cent to 12.38. The market breadth is positive for the whole week. The FIIs bought Rs . 8,320.48 crore and the DIIs bought Rs. 69,176.47 crore during this month.

The benchmark index closed at its highest level after 1st October 2024. It closed near the 2nd October gap area too. The higher volume last week indicates the buying interest. The index is just 623 points away from the all-time high. The index registered failed breakouts thrice in the last six weeks of consolidation. Last week’s breakout was stronger with a massive bull candle and higher volumes, validating the breakout. The immediate target and resistance are 25761, which is also a gap area resistance and a 38.2 per cent retracement level of the prior swing. In any case, the index sustains above 25761, and it can test the new high at 26557. The previous all-time high is at 26277. The index already retraced 86 per cent of the prior down trend. The index consumed just 11 weeks to retrace 86 per cent of the prior price decline. The prior downtrend is 28 weeks old. It means the index consumed less than 40 per cent of the time. This kind of faster retracements may attract profit after testing the new high. Now, the supports have moved up to 25307 and 24760.

The Nifty has closed outside the Bollinger bands for the last two days, which may result in a mean reversion. It may return into the bands within the next one to two days. This retracement will give fresh buying opportunities. Once the bands turn upside, expect the rally to resume.

The weekly RSI (64.58) is decisively in the strong bullish zone. The daily RSI is also in the bullish zone, negating the bearish divergence implications, as it closed above the prior high. The MACD shows a strong bullish momentum in weekly and daily time frames. Only on the hourly chart, these momentum indicators show signs of oversold and exhaustion.

The India VIX is at the lower band below 13. It has an inverse relationship with the index. This may result in a sharp retracement in the near future. But, it may not affect the trend strength. The index also gained relative strength last week, compared to the broader market. The Metals, private banks, and Reliance led the market rally last week. The leadership is clearly visible in the large caps. The Healthcare sector stocks will also be in the limelight next week. Stay focused on the stocks having better relative strength and breaking out of the base formation.

(The author is partner, Wealocity Analytics, Sebi-registered research analyst, chief mentor, Indus School of Technical Analysis, financial journalist, technical analyst and trainer)