Nifty50 closer to record highs post Gujarat election results; Supertrend indicator gives a BUY

The Nifty50 which slipped towards its crucial support level of 100-days moving average, bounced back to reclaim its crucial resistance level of 10,400 in afternoon trade on Monday.

Indian market which witnessed a breakdown on charts in morning trade bounced back after recent trends started favoring the ruling party BJP.

The latest trends showed the BJP leading in 101 seats and the Congress ahead in 79 in the state of Gujarat. The party fell short of its 2012 tally of 115 seats, but that was something which market had factored in.

The Nifty index rose to an intraday high of 10,443 which is just 47 points short of its lifetimes high of 10,490. The index broke above its crucial supply trend line placed near 10,333 which gave a buy call on the Supertrend indicator.

The 'Supertrend' is a trend following indicator just like Moving Averages and MACD (Moving Average Convergence Divergence). It is plotted on prices and their placement indicates the current trend.

The indicator is easy to use and give an accurate reading of the current trend. The default values used while constructing 'Supertrend indicator' are 10 for Average True Range or trading period and 3 for its multiplier.

The last time when the Supertrend indicator gave a buy signal, the index rose to its lifetime high of 10,490 on November 6th, but soon the strength started fading and it gave a sell signal on 13 November.

The Nifty50 has a strong resistance to 10500 levels; hence, a breakout looks difficult while on the lower side, supports are placed around 10,200-10,300 levels. As long as Nifty holds above 10,350 levels, upside momentum remains intact.

“After closing above its crucial SMA level during the weekend session, the Nifty index is expected to witness strong rally on a short-term basis. It will be imperative for Nifty to hold above 10350 levels and 10400 levels on a closing basis to sustain the rally,” Dinesh Rohira, Founder & CEO, 5nance.com told Moneycontrol.