Nifty forms bullish engulfing candle

NSE Nifty on Thursday gapped up and traded with high volatility. It closed at 17245.05 with 206.65 points or a 1.21 per cent gain. Only the Media index is down by 3.15 per cent. Nifty FMCG is the top gainer with 2.19 per cent. All other sectoral indices were up by 0.5 per cent to 1.5 per cent. The market breadth is 1:1 as 1000 advances and 1052 declines. About 59 stocks hit a new 52-week high and 89 stocks traded in the lower circuit. Reliance, Adani Wilmar, and Ruchi Soya were the top trading counters today.

During the last five days, the Nifty lost 147.5 points or 0.85 per cent. The index experienced all the gap openings and traded with high volatility. The index is trading in a broader range after opening with a big gap down on 18th April. It is still below the gap area resistance. It tried to fill the gap on 21st April but was unsuccessful. Since 5th April, the index experienced gaps on both sides almost every day, with a majority on the downside. It tested the 50 per cent retracement level twice and made four higher low candles, but failed to form a higher high. Over the last seven days, the benchmark index formed a counter-trend consolidation pattern, the Pennant.

The index closed above the 50DMA but failed to close above the 200DMA even after today's up move. The 20DMA is placed at 17441. The Bollinger bands are moving parallelly in a wide range. The consolidation will continue unless the Nifty fills the gap and closes above 17610. On the downside, a prior bar close or a close below 17103 (50DMA) will be negative. At the same time, if the Nifty moves below 16893, it will resume the downtrend. Below the 50DMA, the support is placed at the 16893-16755 zone. The RSI is hovering around 50 zone, and the MACD line is still below zero. Today, the Nifty closed above the Anchored VWAP. The KST and TSI are still in the bearish zone. On a weekly basis, it needs to close above the 20 Weekly average of 17280. Currently, the Nifty has formed a bullish engulfing candle on the weekly chart. This needs to get the confirmation by next week. But, with the increased volatility in the global and domestic markets, trading has become an extremely difficult task. As the overall market is in a bear phase, it is better to have lighter positions and trade only on the confirmation of trend bias.

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