Nifty trend for Tuesday
Nifty extended its northward journey for the fourth straight session on Monday and soared to record closing highs at 13,873.20 levels, up by 0.90 per cent. The advance-decline was strong in favour of the advancers as out of 50 stocks, 42 stocks advanced while only 8 stocks declined.
The price action of the day formed a bullish candle with a gap-up. Nifty surpassed its previous all-time high with a gap-up and recorded a fresh all-time high of 13,885 levels. With this, Nifty negated all its bearish implications.
Nifty rallied nearly 750 points from the last Monday’s low while the RSI on the daily chart has entered into overbought territory. Further, it shows a bearish divergence as the indicator has not marked a new 14-period high in line with the price. This is more or less, an orthodox approach but as we all know that most of the orthodox parameters in 2020 have gone for a toss. Considering this, we will view the RSI reaching overbought territory as an indication of a strong trend. Generally, in a strong uptrend, rallies take RSI to an overbought territory and pullbacks halt near the neutral zone (50 levels).
Further, the hourly, daily as well as the weekly upper Bollinger Bands are creating room for Nifty on the upside. So, the above factors make us believe that Nifty is most likely to touch the milestone of 14,000 mark in the near term.
On the downside, Monday’s gap area of 13,771-13,811 is likely to act as a cushion in case of any dip or correction. We would advise the readers to maintain a positive yet cautious stance and avoid contrarian trades as long as the bulls continue to hold above the gap area.