Nifty forms higher high higher low candles
Volumes were lower in last 6 sessions; Except for financials and metals, the recovery is extended to the broader market
With the negative global cues, the domestic equity benchmark indices opened on a weaker note. But, the buying support or a short-covering at the lower levels, the indices smartly recovered. The NSE Nifty gained by 30.45 points, or 0.16 per cent and closed at 19,465 points. The Bank Nifty and FinNifty declined by 0.34 per cent each. The Metal index is the top loser with 0.94 per cent. All other indices closed with modest gains. The Nifty Media, Realty, and CPSE indices gained over one per cent. The Nifty IT, Pharma, Auto, and Energy indices gained over 0.50 per cent. The India VIX is up by 1.08 per cent and closed at 12.12. The market breadth is neutral as the advance-decline ratio is at 1.1. About 125 stocks hit a new 52-week high, and 91 stocks traded in the upper circuit. Indigo, HDFC Bank, SBFC, and Cochin Shipyard were the top trading counters on Wednesday in terms of value.
The Nifty registered a dramatic recovery from the opening lows. It recovered 165.55 points and formed a higher high higher low candle. On an hourly chart, the index did not breach the prior bar low, which is a positive sign. Volumes were lower in the last six days. Wednesday’s recovery failed to change the market directional change. It took support at the lower Bollinger band and bounced. The market discounted the negative news flow from the global during the day. The index is still below the 8EMA on the daily chart and below the moving average ribbon on the hourly chart.
There is no major change in the RSI. The MACD line declined further. Now the Nifty is trading 0.98 per cent above the 50DMA and 0.84 per cent below the 20DMA. For the last two weeks, the index has been moving between these averages. Currently, the 20DMA is at 19,629 points, and the 50DMA is at 19,275 points. The index has to breach either side of these moving averages for reversal or continuation of the trend. We may see more consolidation above the 50DMA. The short-term 8EMA of 19,510 points may act as immediate resistance. With Wednesday’s recovery, the Elder’s impulse system has formed a neutral bar. Except for financials and metals, the recovery is extended to the broader market. However, the index closed flat to positively, stay cautious as the India VIX continues to rise. Stay neutral negative as long as the Nifty trades below the 20DMA.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)