Nifty forms long-legged Doji

The equities declined for the second straight day and closed on critical support. The NSE Nifty is down by 55.10 points or 0.28 per cent, finally closing at 19,310.15 points. As the volume is less than the previous day, it avoided another distribution day. The FMCG, Metal, Energy, and Media indices registered modest gains. The Nifty IT is the top loser with 1.47 per cent. The CPSE and PSE indices are down by 1.08 per cent. All other indices declined by 0.10 per cent to 0.98 per cent. The broader market breadth is negative as the advance-declines ratio is at 0.67. About 104 stocks hit a new 52-week high, and 69 stocks traded in the upper circuit. Adani Enterprises, Reliance, and Concord Bio were the top trading counters on Friday in terms of value.

On Friday, the Nifty breached several key supports. It declined below the Monday low of 19,257.90 and below the 50DMA. As the market witnesses short-covering in the late afternoon, part of weekend adjustments, the index bounced sharply over 100 points from the day’s low. By the end of the day, a majority of the intraday gains were erased. Even though the index closed just on the support of 50DMA and parallel support line, the structure is clearly weakened. The Nifty formed a long-legged doji candle, which is indecisive.

Importantly, the index closed negatively for the fourth consecutive week, which is the longest fall in recent times. The index continued to form lower highs and failed to form a swing high. The Nifty declined for the second day. Currently, the Nifty holds five distribution days, and declining below the 50DMA is a bearish sign. Even though it closed above the 50DMA by the end of the day, the index is moving in a sloping channel. The daily RSI declined below 45 and got the confirmation of its hidden negative divergence. During the day, the MACD line declined below the zero line. All these factors show the weakness in the market. The market breadth is negative. For now, a close above 19,254 points is a short-term positive. As the index declined for four weeks, we may see short-term pullbacks. Avoid aggressive long positions, and stay neutral to negative bias.

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