Charts indicate bearish tone for Nifty
Index formed a lower high and lower low candle for 3rd consecutive day
The benchmark indices sharply declined as selling pressure was renewed. NSE Nifty declined by 91.65 points or 0.57 per cent. The decline was due to selling pressure in HDFC twins, and the Reliance stock fell over 2.5 per cent. The Nifty Pharma index was the top gainer with 1.38 per cent. The FMCG and Metal indices are up by 0.94 per cent and 0.80 per cent.
The Bank Nifty and Fin Nifty are down by 0.90 per cent each. The broader indices Midcap-100 and Smallcap-100 indices closed positively with 0.16 per cent and 0.22 per cent, respectively. The market breadth is positive. About 21 stocks hit a new 52 week high, and 104 stocks traded in the upper circuit. Reliance, Adani Green and TCS were the top trading counters on Wednesday in terms of value.
As we suspected, the counter-trend rally matured at 16275. It exactly faced resistance at the channel resistance. The decline of 200 points from the day high is violent and declined sharply below the 50DMA. After filling the 13th June gap, the index is hesitant to move higher and loses its bullish momentum.
Wednesday's fall filled the 7th July gap-up area and closed at five day low. For the third consecutive day, the Nifty has formed a lower high and lower low candle. Interestingly, it also retraced more than 23.6 per cent of the swing. Just two days after, the MACD line is about to decline below the zero line. The histogram shows a significant decline in bullish momentum. The RSI is back to the below 50 zone.
Currently, the Nifty is just 1.2 per cent above the 20DMA, which may act as crucial support for now. The Anchored VWAP acted as a strong resistance earlier, will now be placed at 16225, and act as a key resistance. The Relative Strength of the Nifty is declining. The important level is the previous week's high of 16276, and the 20-week average of 16422 will act as key resistance.
Only above these levels the index may move beyond the prior swing high of 16794. Otherwise, be with a negative bias for now. On 75 minutes chart, the Nifty is trading below the moving average ribbon along with the MACD line below the zero line, which is bearish.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
