Nifty not yet completely out of the woods

Nifty extended its northward journey for the second straight day on Tuesday amid global bond yield easing. However, it was a volatile day as at one point of time, Nifty fell nearly 170 points from the day’s high and it was only during the last leg of the trade that the bulls came out with all guns blazing and ended the day up by 1.07 per cent at 14,919 levels.   

Among the sectoral indices, barring Nifty PSU Bank, all other indices ended in green with Nifty Auto and Nifty IT gaining more than 3 per cent. India VIX further cooled off by nearly 8 per cent and closed below the 24-mark. The advance-decline ratio was in the favour of advancers.   

The price action of the day formed a small-bodied bullish candle, carrying a sizeable lower shadow, indicating a sharp recovery from the lower levels of the day. In the last two trading sessions, Nifty gained 2 per cent and managed to close near the highs of Friday’s candle. With this strong upmove of the last two trading sessions, the bulls made an attempt to fill the bearish gap zone of 14,919-15,065, which was made on February 26. However, the gap remains partially unfilled while the index is yet to reclaim its 20-DMA.   

Going ahead, the gap area of 14,919-15,065 as well as the 20-DMA, which is also present in this zone is likely to act as an immediate resistance zone. Whereas, on the downside, immediate support is seen around the 14,850 levels, and a breach of this support level would result in a fall towards 14,700 levels.   

Despite this strong pullback from the lows of 14,667 levels, none of the reliable momentum oscillators generated a buy signal on the daily timeframe chart, indicating that the index is not yet completely out of the woods. Hence, it would be prudent to participant in the stock-specific action. Meanwhile, on the index front, let’s adopt a wait & watch mode until Nifty reclaims its 20-DMA.