Nifty, Bank Nifty form bearish candles

The benchmark indices on Tuesday gave up the opening gains and closed below the opening range. The Nifty is up by 33.60 points or 0.16 per cent and closed at 18,348 points. The Nifty Media index is the top gainer with 1.12 per cent. The Nifty Auto, Pharma and Energy indices were up by over half a per cent. The Nifty IT index declined by 0.46 per cent. Infra and Realty indices also closed lower. The Advance-Decline Ratio is at 1.12. About 70 stocks hit a new 52-week high, and 68 stocks traded in the upper circuit. Adani twins, HDFC Bank, ICICI Bank, and HDFC were the top gainers today in terms of value.

The Nifty opened with a positive gap and later traded sideways most of the time. During the last 45 minutes, it witnessed a sharp profit booking and declined 54 points. It formed a Shooting Star candle almost at the previous swing high. A rejection from a previous high close is a worry. The way it fell showed an intense profit booking. After two days of a huge rally, the IT stocks fell because of profit booking. The opening gap in the Nifty filled in the last half-hour decline.

The daily RSI flattened for the second and may enter into the neutral zone if the index declines. The MACD and Signal lines move parallel and do not show any momentum strength. On an hourly chart, after a series of indecisive bars, the Nifty declined sharply into the moving average ribbon. The hourly RSI is also declined near to the bearish zone from a strong bullish zone.

Even the Bank Nifty closed below the opening level and formed a bearish candle. Two before the expiry, two major indices formed bearish candles. The next two days of trading will be tricky and may increase in volatility. The broader index, Nifty 500, outperformed because of small and mid-cap stocks rally. Focus on selective stocks and maintain risk management.

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