Charts indicate indecisive direction
Nifty formed a long-legged small body (Doji) candle at the Anchored VWAP resistance; The hourly RSI declined below its 20-period average; The histogram shows the momentum completely waned; Nifty is still trading within last Monday’s range for 6 days
The domestic stock markets are showing early signs of exhaustion. NSE Nifty gained 25.85 points or 0.15 per cent and closed at 17,769.25 points. None of the sector indexes gained by one per cent. Only the PSU Bank index was up by 1.31 per cent. Nifty Energy is up by 0.77 per cent. The Infra and Metal indices are up by 0.63 and 0.61 per cent. FinNifty Media, IT, and Healthcare indices are down by 0.10 per cent to 0.16 per cent. The Advance-Decline ratio is at 1.16. About d49 stocks hit a new 52-week high, and 68 stocks traded in the upper circuit. HDFC Bank, ICICI Bank, and Axis Bank were the top trading counters again today in terms of value.
The Nifty has formed a long-legged small body (Doji) candle at the Anchored VWAP resistance. After yesterday’s big positive day, the indecisive candle shows that the bulls and bears are in a tough fight. The index also faced resistance at the previous breakout level. Though the volumes were higher in the last six days, it could be a distribution. On an hourly, the last two bars indicate the bear domination. The hourly RSI declined below its 20-period average. The histogram shows the momentum has completely waned. Interestingly, the Nifty is still trading within the last Monday's range for six days. Another frontline index, Bank Nifty, also has formed an indecisive and bearish candle - Evening Star. The Bank Nifty volume indicates the distribution. Today, HDFC group stocks have given strength to the bears. None of the sector index gained at least one per cent.
If the Nifty close above 17,776 decisively, it can test 18,000-18,115, where it can form the right shoulder’s top. The market is still in the rally attempt mode. Whatever the rally we are experiencing, it is still a bear market rally. A strong negative with high volume will indicate the reversal. The 17,775-17,863 zone is crucial resistance for the short term. On the downside, the 200DMA of 17,624 is the key support. As the momentum is waning, avoid trading in indices and focus on stocks with strong relative strength.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
