Nifty forms Evening Star Candle
Better to stay cautiously optimistic; Keep risk management in place
After a day of high volatility, Nifty formed an inside bar in a subdued session. Nifty traded in just a 101-point range on Fri, On an RBI monetary policy day with volumes almost half those of the previous day. The weekly volume is higher than the previous week, which is an indication of fresh buying interest
On monetary policy day, the benchmark index traded sideways. The Nifty closed flat by losing just 0.95 points and closed at 22513.70. Three private sector banks, HDFC, ICICI, and Kotak Bank, together contributed over 50 points to the index on Friday. On a neutral RBI policy day, the banks and financials outperformed. The Banknifty and FinNifty gained by 0.90 per cent and 0.86 per cent, respectively. The Nifty Realty index is the top gainer with 1.43 per cent. Nifty IT is the top loser with 0.50 per cent. All other sectoral indices were gained or lost by just less than half per cent. The India VIX is up by 1.05 per cent to 11.33. The market breadth is positive as 1603 advances, and 1012 declines. About 126 stocks hit a new 52-week high, and 176 stocks traded in the upper circuit. HDFC Bank, IREDA, JioFin, and Liquid BEES were the top trading counters on Friday in terms of value.
After a day of high volatility, the Nifty formed an inside bar in a subdued session. The Nifty traded in just a 101-point range on Friday, On an RBI monetary policy day with volumes almost half those of the previous day. It is clearly evident that the market is nervous at the new high. On Thursday, the benchmark index formed a new lifetime high and registered the highest weekly close. The Bank Nifty also registered the highest weekly closing above the 48293. In fact, the Bank Nifty has broken out of an ascending triangle on the weekly chart, along with the RSI breakout above 60. The all-time high is just less than 200 points away. The Nifty has gained by 0.80 per cent in the last four trading sessions. By closing above 22494, the index has registered a 5-week base. The weekly volume is higher than the previous week, which is an indication of fresh buying interest. Currently, the distribution day count is just two, which is also a character of the strong uptrend.
But, the momentum and the relative strength are the major concerns. The RSI was hovering around 60 the whole week and had failed to move above 65, which is a prior high. The MACD shows a flat momentum. These two key indicators developed a negative divergence. When the market is making repeated highly volatile moves at all-time highs, it is an indication that topping formation is forming. The Nifty has formed an Evening Star Candle, which is also a sign of exhaustion. However, the index has not given any weak signals. So, it is better to stay cautiously optimistic. Keep risk management in place.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
