Market Technicals: Heading Into A New Year With Optimism

There is no dearth of optimism if you look at the index. After all, it is trading at all-time highs, and the Bank Nifty is also fast playing catch up. There doesn’t seem to be any kind of let-up in the momentum signals on the indices. My other favourite index, the Nifty Alpha 50 is also zooming away to new highs and doing so with a lot of fresh momentum. So, it appears that all is indeed well with the trends for the moment and we are about to enter a new Samvat year on a high note.

Since the start of November, the Nifty has been on an absolute tear and much of this seems to me like a Dollar carry-trade. The FII numbers have been heavy and consistent through the month so far and there hasn’t even been a hint of a reaction so far! Despite those notes of cheer on the daily charts, one does find some consolidation now happening on the intraday charts for three successive sessions now. That clearly hints at some hesitation.

The problem is mainly for those that missed the bus or who engaged in short burst trading out of fear that the market would peel off. For them, every new day brings fresh opportunities but with ever higher risks. Such players need to keep a tighter vigil on what they do because they don’t have the luxury of built-up profits perhaps. However, long side play is still the way to go until evidence suggests otherwise.

During the week we saw cement and metals doing well and this pushed the commodity index out of consolidation and that ought to see them continue to do well.

Range breakout moves were visible in CNX Midcap and small-cap indices as well. This should bode well for retail traders as they may now start seeing improvement in their portfolios.

Perhaps the main indices may halt for a while and action now shifts to the small- and mid-cap names. That ought to get the sentiment juices flowing nicely! The best news for retail was that the NSE 500 broke into all-time new highs this week too.

So, with breadth now supporting the up move and liquidity continuing to be in plenty, news flow remaining more on the positive, the situation is all set for bullish action to continue and for a possible shift of attention to the small- and mid-cap area.

Here is wishing everyone a Happy Diwali.

CK Narayan is an expert in technical analysis and founder of Growth Avenues, Chartadvise and NeoTrader Chief Investment Officer - Plus Delta Portfolios.

The views expressed here are those of the author, and do not necessarily represent the views of BloombergQuint or its editorial team.