73% of Nifty50 stocks above 50-EMA: What this signal means for traders
Market breadth has turned positive, with 73% of Nifty 50 stocks trading above their 50 EMA. This indicates expanding participation in the ongoing rally. Technical indicators suggest a strong upward trend for Nifty and Bank Nifty. Analysts recommend a buy-on-dips strategy for Nifty as long as it holds above 26,000. Bank Nifty is expected to move towards 61,500.
Market breadth has turned decisively positive, with 73% of Nifty 50 stocks now trading above their 50 EMA, signalling expanding participation in the ongoing rally. According to Rupak De, Senior Technical Analyst at LKP Securities, this sharp improvement reflects strengthening momentum and improving risk appetite, enhancing the likelihood of sustained upside for the index in the near term.
Edited excerpts from a chat:
How do you read the momentum seen in the last 3 trading sessions which made the Nifty end up with 1% weekly gain. How close are we to getting towards 26,400?
Following a breakout above the previous swing high, the trend appears very positive. This, coupled with a bullish crossover of the 20 EMA and 50 EMA, suggests a strong upward trend. The RSI on the daily timeframe has also broken out of its earlier consolidation range, indicating improving momentum. Overall, the technical chart setup points to a smart upward move in the short term.
In addition, 73% of Nifty 50 stocks are currently trading above their 50 EMA, a sharp improvement from 52% three days ago, which indicates strengthening breadth and improving sentiment in the large-cap space.
The trend is likely to remain strong in the near to short term, with a buy-on-dips strategy favoring the bulls as long as the index holds above 26,000. On the higher end, a decisive move above 26,350 could trigger an advance towards 26,600 in the short term.
Nifty Bank hit fresh high and has been an outperformer. Ahead of the earnings season, how would you trade the index?
The Bank Nifty has remained a clear outperformer relative to the Nifty over the past few sessions. A falling trendline breakout, along with a reclaim of key short-term moving averages, has acted as a tailwind for the index. The index has now entered a strong momentum zone, increasing the probability of a move towards 61,500 in the short term.
On the lower end, immediate support is placed at 59,500; a sustained move below this level could weaken the current trend.
Given the sharp sell-off seen in ITC shares, do you think the stock is now showing signs of being at oversold level? Is it time to buy the fear?
Although the stock has fallen sharply and entered the oversold zone, buying at current levels appears risky. On the weekly chart, the stock has broken decisively below the 200-week EMA for the first time since March 2022, indicating an increase in long-term weakness. Therefore, instead of buying at current levels, a sell-on-rallies approach is recommended.