The Nifty has almost retraced its entire fall from Jan 29 to Apr 10 ‘13 (10 weeks) in less than a month, which is very bullish. All three EMAs are rising and Nifty is trading above them – a clear sign that the bulls are back in control.
However, the index looks ripe for a correction. Volume peaks have been sliding as the index kept rising past the blue downtrend line. Without volume support, the up move may stall.
Daily technical indicators are looking bullish, but overbought. MACD, RSI and Slow stochastic are well inside their overbought zones. ROC formed a ‘double-top’ reversal pattern inside its overbought zone and has dropped below its 10 day MA – perhaps giving an advance warning of a correction.
The index is close to its Jan ‘13 top. It is better to be cautious near a previous top. If and when the correction comes, use the dip to add to existing positions. Some fundamentally strong mid-cap and small-cap stocks that had faced the brunt of bear selling may be looked at for accumulation.