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Nifty forms Dark Cloud Cover candle

The index still needs confirmation for bearish implications; It is still above 8EMA and formed a higher low candle; Rising India VIX may hurt the trend

Nifty forms Dark Cloud Cover candle
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Nifty forms Dark Cloud Cover candle

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The equities have given up Friday’s gains, and the benchmark indices closed lower. NSE Nifty declined by 70.55 points or 0.37 per cent and closed at 18,755.45 level. The Nifty IT and Pharma indices closed with 0.42. and 0.17 per cent gains, respectively. The PSU Bank index gained by 0.96 per cent and saved Bank Nifty from a bigger fall. The Bank Nifty, Metal, FMCG, and Infra indices declined by over 0.6 per cent. The market breadth was negative as the advance-decline ratio is at 0.85. About 141 stocks hit a new 52-week high, and 76 stocks traded in the upper circuit. Adani Enterprises, HDFC Bank, and ICICI Bank were the top trading counters on Monday in terms of value.

The Nifty missed its new lifetime high by just seven points on Monday. It opened above Friday’s high, but did not sustain at higher levels. It formed a dark cloud cover candle at a new high. Still, it needs confirmation for its bearish implications. The index is still above the 8EMA and formed a higher low candle. At the same time, Monday’s decline is with lower volume and does not suggest any major selling pressure or distribution. The support zone was raised to 18,707-662. The upper Bollinger band has been acting as resistance for the last two days. As long as the index is making higher highs, we need to be in the trend. Monday’s high is equal to opening and closing near the low, showing a profit booking. But, for weaker signals, it must close below 18,700pts.

On an hourly chart, it closed in the moving average ribbon and the support at 18,722pts, also at the confluence of supports. The MACD line is declining, and the RSI is back to near the 60 level. The volatility index, India VIX, rose by 3.55 per cent on Monday, hinting at more spikes on the cards, which may hurt the trend. On Tuesday, the 18,888-18,700 zone is very critical for ongoing trend. Either side breakout will result in an impulse move. Stay neutral within this zone. Currently, risk-reward ratios are not favourable for both sides.

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

T Brahmachary
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