Charts indicate trend exhaustion
Index closed flat and formed spinning top candle; There is a serious negative divergence visible in RSI, daily histogram and hourly MACD; Bearish momentum likely if index falls below 18,229pts
The equities erased opening gains as the profit booking took place in select large-cap stocks. The benchmark index, Nifty, closed flat with just 1.55 points gain at 18,265.95 points. The Nifty IT index is the top gainer with 0.73 per cent. The Nifty Auto Pharma indices closed with less than half a per cent gains. The Nifty FMCG, Bank Nifty, FinNifty and Metal indices declined by 0.10 to 0.35 per cent. The advance-decline ratio is at 0.81. About 82 stocks hit a new 52-week high, and 47 stocks traded in the upper circuit. The new listing Mankind Pharma is the top trading counter today. HDFC Bank, ICIC Bank, and Bajaj Finance were the top trading counters on Thursday.
The Nifty opened with a positive gap and closed flat by erasing the morning gains. Most of the sectoral indices also erased the gains. The Market breadth turned negative. Today’s price and volume data shows that the market recorded more selling volume. Still, there is no negative signal available currently.
There is a serious negative divergence visible in RSI on an hourly chart. The hourly RSI declined below 60. A close below 40 will give bearish signals. The daily histogram has developed negative divergence, which is more powerful when the trend is over-extended. The hourly MACD has also developed a negative divergence and given a sell signal. As we expected, the Bank Nifty also traded within the previous two-day range. Today’s candle looks like a spinning top, and a close below today's low of 18,229 will be a strong bearish signal. The spinning top candle signifies the exhaustion in the trend. Before moving further highs, the index may consolidate for some time. Today’s 200 points range breakout was not sustained. A decisive and big-bulls candle is needed to negate today's exhaustion. The upside is limited from now, and a reasonable correction is due. Be with a neutral view of market direction.
(The author is Chief Mentor, Indus School of Technical AnalysisFinancial Journalist, Technical Analyst, Trainer, Family Fund Manager)
