Charts indicating early sign of weakness

The three-day winning streak finally ended with a distribution day. After opening on a flat note, the NSE Nifty started falling slowly. It closed near to the day's low. At the end of the day, the Nifty fell by 101.70 points and settled at 15767.55. FMCG and IT indices only registered a positive closing by 058 per cent and 0.25 per cent, respectively. The Metal index fell sharply by 2.85 per cent. The Realty, Infra, and Media indices fell by over one per cent. All the other sectoral indices closed with above 0.50 per cent losses.

The India VIX up by 1.78 per cent, but still below the 15. The Market breadth is negative as 1,290 declines and 720 advances. 215 stocks hit new 52 weeks high, and 169 stocks are in the upper circuit. The Nifty closed below the prior day low and filled the gap. Generally, a close below the Doji at a lifetime is a negative indication. After three consecutive small body candles, the big red candle gives an early sign of weakness.

Barring FMCG and IT, all sectoral indices declined. The momentum is clearly waning, and it is at the zero line. A small decline can cause the histogram into the negative zone. The negative divergences are indicating that the upside is limited. The Nifty may test maximum of 15,986 points. For the last three days, the Nifty making a new record high with indecisive candles, which depicts the indecision at the lifetime high. The index is moving higher since May 14 without making any lower swing. Let us wait and see, and the weakness will lead to a lower swing. In such a case, the recent high 15,901 points will become an intermediate top, as long as the Nifty trades below to it. As mentioned yesterday, the derivatives data suggests 16,000 level very strong resistance for now. On the downside, 15606, 15566 are the key supports for now. The 20DMA support is placed at 15,501 points. These levels are very critical for now. The only case falling below 15,500 will give the bearish signal.

(The author is financial journalist, technical analyst, family fund manager)