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Nifty

It’s time to exercise caution as Nifty registered a consecutive 3rd upward gap in a row & wait for a reversal sign. ‘BreakawayGap’ at16560 breaking the 200 DEMA level followed by a ‘Run Away Gap’ at 16774 ahead of the July monthly expiry sawyet another GAPonthe final day of the JULY month primarily looks like an ‘Exhaustion GAP’. The sequence needs a confirmatory move belowits ExhaustionGap support to confirm the swing top. This sequence of GAPs conveys an end of a primary move as ‘Break Away Gap’ primarilyoccursatthe completion of a pattern while ‘Exhaustion Gap’ usually occurs at the end of a trend or at an important support or resistancelevel.This set of Gap sequence ahead of the key RBI policy event could be a sign of caution & hence a trailing stop strategy shouldbeadheredstrictly while carrying forward any trading longs. Trend strength indicator RSI at 76 has hit its overbought zone but there is nosignofanydivergence in strength while ADX is still in a upward trending mode at 36. Hence, it’s too early to decide on a probable top&henceaconfirmation on the reversal side would be awaited. It’s ideal to remain cautious & advisable to deploy a sizeable hedge against yourlongs. While booking profits where ever necessary post a vertical run-up too remains a prudent strategy as the nifty inches closertowards its expected resistance zone around 17480 for this series.

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