Nifty forms 2 consecutive lower highs, lows candles

The benchmark indices slipped as the fresh short built up, and profit booking dominated the market on Tuesday. NSE Nifty declined by 157.7 points or 0.97 per cent and settled at 16058.30. Only Realty and Energy indices closed marginally higher. The Metal, Media, FMCG, and Auto indices are down by over one per cent. The other indices were down by less than a percentage. Only seven stocks are able to close in the positive territory out of Nifty 50 stocks. The Market breadth is extremely negative. About 29 stocks hit a new 52-week high, and 102 stocks traded in the upper circuit. Adani Green, Reliance and TCS were the top trading counter in terms of value on Tuesday.

The Nifty has closed below the prior day and tested the four days low. As suspected on Monday, the shorts were further increased. On Tuesday, the index has taken support at 8EMA and 34 EMA. As it formed two consecutive lower highs and lows candles, the upside swing has matured. It took support at the 23.6 per cent retracement level of the current upside move. The Nifty also met the bullish flag pattern target. The stochastic oscillator gave an early signal On Monday, and on Tuesday it is sharply coming down from an extreme overbought condition. The RSI is also slipped to an almost neutral zone. The histogram also shows a decline in bullish momentum. In fact, on a lower time frame, the Nifty has broken the double top pattern. Tuesday's selling pressure with high future volume and an increased open interest shows that fresh shorts were built up. The daily HeikenAshi candle turning red is an early indication of a reversal. Our earlier forecast of filling the gap has been a reality. The last two day's move confirms that the counter-trend rally is in the matured stage. For now, better book the profits on long positions, and wait for clear shorting opportunities.

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