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Charts indicate exhaustion in upswing

Nifty turned weaker with losses for past 3 sessions; Nifty forms a bearish Heiken Ashi candle

Before the RBI monetary policy, the equity market felt nervous. The benchmark index, Nifty, closed at 17639.55 with 168.10 points or a 0.94 per cent decline. A majority of sectoral indices closed negatively. The oil and gas index declined by 2.24 per cent, which is a top loser for today. The Nifty consumer durable and Metal indices are down by over 1.5 per cent. Metal, Media, and the IT indices are down by over one per cent. The Healthcare, Pharma and Realty indices are up by half a per cent. The market breadth is negative as 1151 declines and 918 advances. About 89 stocks hit a new 52-week high, and 178 stocks traded in the upper circuit. Tata Power, HDFC Bank and HDFC were the top trading counters. The Nifty has filled Monday's gap. It has broken down the rising wedge pattern. By closing below 17700, closed at the lowest level of the day, the market has erased all Monday's gains and given weaker signals. As mentioned earlier, the index has broken the 17700-17791 zone. With this, the Nifty failed to reach the prior swing or to close above the sloping trend line resistance. For the last two days, both 50DMA (17132) and 200DMA (17120) have been flattened and moved together. In any case, the 50 DMA closes below the 200DMA, which will confirm the bearishness. The 20DMA support is at 17382. On a weekly chart, the Nifty is forming a shooting star candle, which is also bearish.

In fact, the Nifty has formed another lower high on Monday. Three consecutive days of negative closings with negative gaps is also indicating weakness. Monday's euphoric move because of HDFC twins merger news is now erased. Now, the market will move its own course. The RBI monetary is due and expected to end its take it eases policy, and it is expected to raise the policy rates to curtail the inflationary pressures. The Q4 earnings will begin next week. This series of news flows may influence the market. From now, the market will move mostly on the news flow.

Technically, the Nifty has formed a bearish Heiken Ashi candle. The declining histogram shows the waning of bullish momentum. As many indicators are showing exhaustion in the upswing, it is better to avoid the long position unless the Nifty forms a close above the previous day's high.

(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)

T Brahmachary
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