Charts indicate bearish signs
Nifty formed an open high candle, close low; For last 3 days, it has been forming a lower low candle, which is also a weaker signal and MACD line is about to cross below signal line
The profit booking continued for the second consecutive day. NSE Nifty declined by 46.65 points or 0.25 per cent. Nifty Pharma is the top gainer with 1.06 per cent. The Nifty IT and Auto indices gained by 0.40 per cent. The Bank Nifty and FinNifty were the top losers with 0.58 per cent and 0.63 per cent. All other indices gained or lost by less than 0.50 per cent. The Advance-Decline ratio is 1.63. About 119 stocks hit a new 52-week high and 102 stocks traded in the upper circuit. Suzlon stock recorded the highest volume on Thursday, as positive news flow about the new orders. HDFC Bank, ICICI Bank, and Reliance were the top trading counters on Thursday in terms of value.
The Nifty has formed a most bearish bar and closed the low of the day. It opened with a positive gap, but did not sustain. It formed an open high candle, close low, which is a strong bearish sign. After last week's massive move, the index has traded in a range for the last four days. The index is almost testing the last Friday's breakout level. Though it opened the week with a massive gap up, the range is limited to less than 200 points in the previous four days. It is closed near the low of week and day. For the last three days, the Nifty has been forming a lower low candle, which is also a weaker signal.
The MACD line is about to cross below the signal line. The RSI is also ready to enter the neutral zone. It closed below the 5EMA and took support at 8EMA for the day. Currently, the Nifty is trading just 0.87 per cent above the 20DMA. The KST has given a sell signal. On an hourly chart, the Nifty closed below the Moving average ribbon, and the MACD line is below zero line, which is a fresh bearish signal. The Hourly RSI is near the bearish zone.
For the near term, Nifty needs to protect Thursday’s low. A decline below 18,458 will be negative, and it can test 18,229 in 2-3 days. In the bull case scenario, a close above Thursday’s high (18,580) is positive and may test the previous high of 18,663 points. For the next 2-3 days, Nifty may oscillate in the 18,229-18,663 zone. If the Nifty closes below 18,343pts, it will form a dark cloud cover, which is a bearish candle. But it needs confirmation for its implications by next week’s closing. Recently, several bearish patterns failed in all time frames. So, wait for a confirmation for a short entry.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
