Nifty forms bullish engulfing candle
Index has formed another lower low and lower high candle; To continue bullish bias, it must close above Tuesday's high of 18,420 and it is likely to turn positive above Thursday’s close of 18,321.10
On a monthly expiry day, NSE Nifty traded with high volatility. With a short covering in the last hour, it is able to recover and close positively. The Index gained by 35.75 points or 0.20 per cent and closed at 18,321.10. The Bank Nifty and FinNifty closed flat. The Nifty Realty index is the top gainer with 1.12 per cent, followed by a 0.61 per cent gain by the FMCG index. All other sector indices closed with minimal gains. The advance-decline ratio is at 1.22. About 88 stocks hit a new 52-week high, and 55 stocks traded in the upper circuit. HDFC Bank, Adani Enterprises, and ICICI Bank were the top trading counters on Thursday in terms of value.
The Nifty took support at the 20DMA and bounced in the last hour as the short-covering came in as the monthly expiry. It closed at the day's high. It formed a bullish engulfing candle. Yesterday’s volume was lower than the Wednesday. On a volatile day, the VIX is down by 3.70 per cent. After two consecutive bearish shooting stars, Thursday’s engulfing candle spoiled the bear's enthusiasm. But at the same time, the expiry day move can’t be trustworthy as most of the price action is because of rollovers and short-covering. The Nifty has formed another lower low and lower high candle. If the Nifty closes above Thursday’s close, it is positive. To continue the bullish bias, it must close above Tuesday's high of 18,420 points. The Index is trading within the last week's range. An inside bar on the weekly chart shows indecisiveness. On a longer time frame chart, the 18,060-460 zone is crucial.
A weekly close above 18,460 is a continuation of the trend and can test 18,700. But, a close below 20 DMA of 18,224 will give the first sign of weakness. And a weekly close below 18,060 is negative and a sign of reversal. The 23.6 per cent retracement level of the prior trend is at 18,074. It can test 17,836 in the near term. There is event risks like the US debt ceiling and fear of default are significant concerns for the global market. The Dow Jones closed below the prior swing low and signaled bearishness. So, it is better to stay cautious and stay with a light position size.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
