Nifty forms a lower low and lower high candle
The benchmark index failed to close above the opening level, but it closed above Tuesday’s high; It formed a Shooting Star candle on an hourly chart
Further pullback rally more likely
Positive Market Breadth
- 1,562 advances
- 984 declines
- 250 stocks at new 52-wk high
- 145 stocks in upper circuit
- MACD histogram shows a cool-off in bearish momentum
The equity benchmarks closed positively for the third successive day. NSE Nifty gained by 28.50 points or 0.13 per cent and closed at 21,647.20 points. The Nifty Energy and Auto indices were the top gainers with 1.30 per cent and 1.06 per cent. All other sector indices were closed at less than half a per cent gain or loss. The India VIX further declined by 1.56 per cent to 12.76. The market breadth is positive as 1,562 advances and 984 declines. About 250 stocks touched the new 52-week high, and 145 stocks traded in the upper circuit. Polycab, Reliance, Easemytrip and IRFC were the top trading counters Thursday in terms of value.
The Nifty opened above the previous day’s high with a positive gap. Within 15 minutes, it attracted the profit booking and formed a shooting star candle on an hourly chart. With this high volume selling, the Nifty failed to close above the opening level, but it closed above the previous day’s high. The index registered a third straight positive day. However, it is trading below the Monday’s high. As stated earlier, a close above the 21727 on the weekend is important to avoid the bearish engulfing pattern. It already formed a lower low and lower high candle on the weekly time frame. The index has recovered 76 points in the last hour; otherwise, it would have closed in the negative territory. Even yesterday, it gained 162 points in the last hour of trading. The Reliance saved the index for the second day by contributing 45.64 points today and over 65 points yesterday. As stated earlier, the large caps stock in the Nifty will save from a bigger fall. The earning season has begun on Thursday, so the market is nervous about the direction.
The volumes have been declining for the last five days. The MACD histogram shows a cool-off in the bearish momentum. The consolidation above 21,500 may continue tomorrow if earnings are not disappointed. For now, stay neutral between 21,500-21,765 zone. Currently, the index needs to be more clear on the direction. A move above the 21,725-65 zone is positive, and it can test 21,834. On the downside, It may hold the 21,500 support for this week. Stay cautious on both sides.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
