Doji candle indicates indecisiveness

Positive Market Breadth

• 1,389 advances
• 1,076 declines
• 217 stocks hit a new 52-week high
• 119 stocks traded in lower circuit
• VIX is up by 5.88%
• Hourly RSI below 75 zone

The equities took a rest for the day after a massive rally last week. NSE Nifty declined by 38 points or 0.18 per cent and closed at 21,418.65 points. The Nifty Media and Pharma indices gained by 1.18 per cent and 0.94 per cent, respectively. The Infra, Auto, and Metal indices closed with modest gains. The Bank Nifty and FinNifty were down by 0.57 per cent, and 0.39 per cent. The Realty, FMCG, and IT indices were also closed lower. The India VIX is up by 5.88 per cent to 13.90. The market breadth is positive as 1,389 advances and 1,076 declines. About 217 stocks hit a new 52-week high, and 119 stocks traded in the lower circuit. IRCTC, IREDA, IRFC, and Reliance were the top trading counters today in terms of value.

The Nifty paused its rally and formed an inside bar. The daily range was also shrunk to just 117 points. The volumes were recorded not even half the previous days and were below the average. It shows the tiredness in the trend. The Doji candle indicates indecisiveness. A Doji rule is that, at a near all-time high, the next candle must close below the Doji for its negative implications. After a massive rally of over 14 per cent, the consolidation is imminent, sooner or later. As mentioned earlier, A close below 21,235 (Friday Low) will give a weaker signal.

The 8EMA of 21,105 is an important support for now. If the Nifty closes below this level, consolidation will be confirmed, and it can test 20,865 initially and then 20,478, which are 23.76 per cent and 38.2 per cent retracement levels of the prior upswing. The MACD is about to give a bearish signal on an hourly chart. The hourly RSI also drifted below the 75 zone. Except for the first hour, the volumes were dried up. Now, a move above 21,482-93 will resume the upward move. It may test the 21,565 level. But on the downside, a decisive close below 21,235 with an added distribution will give weaker signals. Stay on the neutral bias for now, with reduced position size.

(The Author is Chief Mentor, Indus School of Technical Analysis Financial Journalist, Technical Analyst, Trainer, Family Fund Manager)