Nifty forms an inside bar
As the weekend is approaching, it is better to have a reduced position size, the index is forming a bearish engulfing candle on a weekly chart
Positive market breadth
- 572 declines
- 2059 advances
- 228 stocks in lower circuit
- RSI forms a bearish divergence
- 145 stocks hit a new 52-week low
The equities took a breather after a big jolt. Barring BFSI, all the sector indices were recovered. The Nifty gained by 148.95 points or 0.68 per cent and closed at 222146.65. The Banknifty and FinNifty declined by 0.41 per cent and 0.16 per cent. The Smallcap is top gainer on Thursday with 3.45 per cent. The PSE and CPSE indices up by 2.28 per cent, and 2.13 per cent, respectively. The Midcap-100 index also up by 2.02 per cent. The Nifty Metal, IT, Media, Energy, and Infra indices were gained over 1.5 per cent to 2 per cent. All other indices were up by 0.60 per cent to 1.5 per cent. The India VIX is down by 5.61 per cent to 13.62. The Market breadth is positive as 2059 advances, and 572 declines. About 145 stocks hit a new 52-week low, and 228 stocks traded in the lower circuit. HDFC Bank, Reliance, IRFC, and JioFin were the top trading counters on Thursday, in terms of value.
The week opened with a new high on Monday and reacted from the Wedge resistance. The Nifty declined sharply by 609.10 points or 2.70 per cent in just three trading sessions. It formed an inside bar on Thursday, as a majority of sectors have recovered, and the breadth has improved. It closed in the Wedge pattern at the end of the day. Thursday’s inside bar price actions are a breather for the market. The index has faced resistance at 20DMA and recorded above-average volume. On an hourly chart, the moving average ribbon acted as resistance. On a weekly chart, the index is forming a bearish engulfing candle. Currently, it is trading below the previous week’s low. In any case, if it closes below 22224, it will give weaker signals. After the October 2023 low, the Nifty never closed below the prior week’s low.
The weekly RSI has formed a bearish divergence. Only if it closes above 75 will the divergence be negated. The index has tested the 50 per cent retracement level of the previous day’s fall. Though the breadth has improved on Thursday, many stocks still suffered losses, as at least 235 stocks traded in the lower circuit. A 2 - 35 per cent recovery in PSE, CPSE, Mid and Smallcap indices improved the market sentiments. For now, as the weekend is approaching, it is better to have a reduced position size. A close above 22205 will be positive and can test Wednesday’s high of 22446. If it closes below 22224-22100, the zone of support is negative for the market. Below this support, the immediate and strong, and critical support is at a 10-week average of 21972. Below this level, the market will enter into a corrective phase. Stay cautious.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
