Markets overbought; Bias for Nifty to remain bullish above 11,225

@rex_cano

Mumbai

After trading in a tight range for the last five trading sessions, the markets made a decisive move on Tuesday on the back of aggressive buying amid some short-covering ahead of the monthly derivatives expiry. Global cues along with expiry related pressure are likely to play a dominant role in the near term. The markets will also keep an eye on the news development related to a fresh US stimulus package and India Unlock 3 plans.

The BSE benchmark index, the Sensex, opened with a positive gap of 120-odd points at 38,052. After some initial hesitation wherein the BSE index touched a low of 37,998, the index firmed up and marched to higher levels as the day progressed. Auto, IT and financial shares rallied in tandem today. The BSE Sensex surged to a high of 38,555, and finally ended with a solid gain of 558 points at 38,493.

Among the Sensex 30 stocks, UltraTech Cement soared over 7 per cent. TCS, Kotak Mahindra Bank, Mahindra & Mahindra, Maruti and IndusInd Bank surged 4-5 per cent each. Bajaj Auto, Tech Mahindra, Bajaj Finserv, HDFC, Bajaj Finance, HCL Technologies, Tata Steel, Infosys and Sun Pharma also finished with smart gains. ICICI Bank, however, slipped nearly 2 per cent. Nestle, Asian Paints, ONGC and ITC were the only other losers.

The BSE index has now given a buy signal on the weekly Fibonacci chart. As per the weekly chart, the bias for the week is likely to remain bullish as long as the BSE index sustains above 38,130-level, with near support expected around 38,365. On the upside, the Sensex may now test the weekly R2 and R3 at 38,660 and 38,790, respectively.

As per the daily Fibonacci charts, on Wednesday, in case of an up move the BSE Sensex may face resistance around 38,705-38,770-38,835, and in case of a down move, the BSE index is likely to seek support around 38,280-38,215-38,150.

With today’s 1.5 per cent gain, the NSE Nifty has now closed at the highest level since March 3, 2020. The NSE index has managed to break from its tight consolidation range of 11,050-11,250. However, caution is advised at higher levels in the near term as key momentum oscillators have once again entered overbought territory.

As per the daily charts, the NSE index needs to sustain above 11,225-odd level for the positive momentum to continue. On the upside, the index is likely to move along the higher end of the Bollinger Band at 11,360-odd level. Sustained trade above 11,360-level can trigger a sharper rally.

On the flip side, failure to sustain above 11,225, can trigger some profit-taking, wherein the Nifty may possibly slide all the way towards the 200-DMA (Daily Moving Average) at 10,865-odd level. One can expect markets to be volatile owing to monthly futures & options expiry for the July series. 

Among the key momentum oscillators on the daily charts, the DI (Directional Index) and the ADX (Average Directional Index) continue to remain in favour of the bulls. The Slow Stochastic and the MACD (Moving Average Convergence Divergence) remain inconclusive, while the 14-day RSI (Relative Strength Index) has re-entered the overbought zone.

Disclaimer: The views expressed in this article are personal and for information purpose only, it does not advocate any buy or sell /recommendation.