Nifty forms Dark Cloud Cover candle

The equity benchmark indices declined sharply for the second consecutive day. NSE Nifty declined by 105.75 points or 0.56 per cent and closed at 18,665.50pts. Only the Nifty Pharma index closed flat to positive with 0.15 per cent. The Nifty Metal and Media indices were the top losers, with 2.48 per cent and 2.13 per cent, respectively. All other sectoral indices declined by 0.2 per cent to two per cent. The midcap-100 and smallcap-100 indices declined by 1.24 per cent and 1.17 per cent. The India VIX also declined by 2.71 per cent to 11.24. The Advance-Decline ratio is at 0.38. About 52 stocks hit a fresh 52-week high, and 75 stocks traded in the lower circuit. Adani Group stocks declined sharply on Friday as negative news flow came in. Adani Enterprises, HDFC Bank, and HAL were the top trading counters on Friday in terms of value. There was a short build-up in the system.

Several attempts by bulls to hit a new lifetime high have failed during the last week. After missing by one point on Thursday, the Nifty declined sharply by 240 points from the high in the last two days. Finally, the Nifty closed below the 20DMA and formed a lower swing low. On a weekly chart, the index has formed a dark cloud cover candle, which is bearish. During the last December high, the Nifty formed a similar candle. After getting confirmation from Wednesday’s hanging man, the bearish momentum has increased. The weekly MACD histogram confirms the momentum loss. The daily MACD is also showing an increased bearish momentum. The RSI finally declined to below 60, into the neutral zone from a strong bullish zone.

The index closed below the rising wedge demand line for the last two days, which means the market structure has changed too much weaker. There are no positive biases in any time frame. The market breadth is extremely negative as the declines are outnumbered. Rollovers were picked up to 18.66 per cent. If the Nifty sustains below 20DMA for another day, the broader market will also enter into the bearish mode. Stay out of the long positions for now, and try to take out the profits from the table.

tor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)