For the second Friday in a row, the benchmark index has seen a strong bullish session with a large gap up opening on the back of global liquidity easing and positive domestic developments. Nifty broke past the resistance of 5500 by opening above that and managed to exhibit a strong rally of ~2% for the day to close at seven-month highs of 5577. It is now a stone’s throw away from the yearly high of 5630 (Feb 2012) that is likely to be eclipsed in today’s session, and will signal a larger change in the underlying intermediate / long-term trend.Coming back on Friday’s session, volumes were significantly higher, but the breadth remained marginally in favour of advances as the broader markets continue to depict weakness. Volatility as per the India VIX dipped marginally to 15.38 and continues to be near record low levels. Stochastic Oscillator (momentum) is extremely overbought in the absolute near-term, whereas the short-term indicator RSI has hit the overbought threshold but also signals a strong uptrend. At higher levels the index is vulnerable to sudden bouts of profit taking, but at the same time dips are likely to be well supported at 5500 mark where one can look to re-enter longs.Trade above 5630 would confirm the uptrend as per Dow Theory, forming Higher Tops and Higher Bottoms, in which case targets are pegged at 5715 (upward trending minor channel) / 5740 (July 2011 high).
Most of the sectoral indices ended the day with strong gains with the exception of FMCG (-0.49%) and Healthcare (-1.24%). Friday’s gain was led by Realty (+4.78%), Metals (+4.25%) and Banking (+4.15%) indices. Broader markets grossly underperformed the frontline index with gains of 0.88% for the Mid-cap index and 0.45% for the Small-cap index.
Bullish Setups: RIL, COAL, TTMT, SAIL, CNXBANK
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