MACD is known for signaling trend reversals. When the MACD crosses above the signal line, as was the case on Tuesday, it gives a bullish signal, indicating that the index may see an upward movement.
“Nifty50 registered a sustainable breakout above the 33-session-old trading range placed in the 15,900-15,500 range. The breakout of this consolidation suggests Nifty50 may now target the 16,300 level. This breakout also triggered a buy signal on the daily MACD indicator, adding more credibility to the current leg of upswing,” said Mazhar Mohammad of Chartviewindia.in.
Mohammad said it is critical for Nifty50 to sustain above the 15,900 level, as a breach of the same may result in a false breakout.
Gaurav Ratnaparkhi of Sharekhan said that the index is headed towards its weekly upper Bollinger Band, i.e. 16,400, which he said will be the short-term target.
“Along with the price breakout, the daily Bollinger Bands have entered an expansion phase, which is in favor of the rally. Additionally, the daily momentum indicator has triggered a bullish crossover and has started a new cycle on the upside from the equilibrium line,” he said, adding that the previous resistance of 15,900-16,000 will now act as a crucial short-term support area as per the principle of role reversal.
The rangebound action seen in the Nifty50 index since the last eight-odd weeks has finally resolved with a breakout on the upside, said Independent Analyst Manish Shah.
“The gap up that broke the consolidation range was a breakaway gap. The Bollinger Bands, which were hitherto experiencing a squeeze have opened up. Plus, DMI on the directional movement system is showing a positive crossover. These are signs of pent up demand showing up on the price charts,” he said.
