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Analysts said the momentum remains strong, but the possibility of a profit booking move has risen, given that the market has entered the overbought territory, as suggested by the relative strength index or RSI.
The RSI indicator measures the index’s internal strength. An RSI value above 70 is considered an ‘overbought’ zone and below 30 ‘oversold’. On Friday, the 14-day RSI stood at 71.17 level.
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He said a major weakness would become valid only once the index slips below the 11,100 level. For now, the analyst expects the ongoing bounce to continue gradually towards the 11,750-11,800 zone in the coming weeks.
For the day, Nifty rose 96 points, or 0.83 per cent, to 11,655.
“Nifty50 formed a big bullish candle after witnessing increased participation from banking stocks. The rally in Bank Nifty has charged the bulls enough and has led Nifty50 to surpass a brief resistance of 11,530. Traders are advised to remain careful as Nifty50 is in the overbought zone and the potential upside might be limited. The immediate support is now placed at 11,200,” Nirali Shah, Senior Research Analyst, Samco Securities.
On the weekly time-frame chart, the index formed a long bullish candle, as the bulls are in full control. “On the daily time frame chart, Nifty has moved along at a steady pace. “There are no signs of an immediate selloff in the market,” said independent analyst Manish Shah.
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