Owing to positive global cues, Nifty opened the session with a gap-up, above the psychological mark of 13,000. And as the day progressed, it got stronger and remained in the rising trajectory. At close, Nifty settled at 13,055 levels, up by 1 per cent.
Nifty has now broken out of a six-day flat base pattern along with a strong bullish candle. With Tuesday’s strong close, the last six days’ consolidation, which contained two hanging man pattern and a few indecisive bars, now has no relevance. Further, the breakout has come along with improved market breadth, and participation was also seen across the board. Now going ahead, the index target is placed around the 13,220 levels. The said target also coincides with the depth of the flat base, which is about 230 points. As the breakout has occurred above the 12,968 levels and if we add 230 points, we would get an approximate target of 13,200. As long as the index trades above the gap area of Tuesday (12,968-12,978), be with a bullish bias.
In recent times, after a breakout of the flat base, we have observed a rapid rise and as the current flat base formation is about six days, the usual 1/3 or 50 per cent of the time are being taken by the index to achieve the target after the breakout. So maybe in a day or two, we may hit the target of 13,200 level.
RSI shows a negative divergence as Nifty made a new high but RSI did not. However, on a lower time frame chart, the RSI has broken out of a downward channel and is indicating that the prior trend has resumed.
Interestingly, the Rollovers T-2 days to expiry have picked up. Nifty Rollover stands at 38.75 per cent and Roll cost is at 21 points premium. In Bank Nifty, Rollover stands at 34 per cent.