Nifty forms lower high and lower low candle

The Indian benchmark indices closed with half a per cent decline, but gained over one per cent from the day's low gives, and indications of a short-term bounce is possible. It is time to be cautious in short positions. NSE Nifty declined by 72.95 points or 0.45 per cent and closed at 16167.10. The Bank Nifty and FinNifty closed with 0.61 per cent and 0.28 per cent, respectively. The Nifty Realty index is up by 0.73, and the Metal index closed flat to positive. The roader index Smallcap-100 index fell by 2.91 per cent, and the Nifty IT index was down by 1.24 per cent. Auto, Infra, FMCG and Energy indices declined by half a per cent. The overall market breadth is negative as 1633 declines and just 452 advances. About 265 stocks hit a new 52 week low and 284 stocks traded in the lower circuit is another indication of broader market weakness. Reliance, Tata Steel and Infosys were the top trading counters on Wednesday.

The benchmark index recovered over 200 points from sub 16000 levels. The Nifty has formed a hammer candle at the bottom, is a short-term bottom signal. In any case, the Nifty forms a higher high and closes above the 16320 will be a positive sign for the market. Today, the index has taken the support at the Channel support. As forecasted, the index has tested the 15980-16050 zone of support. As the recovery formed a long lower shadow candle, it shows that the buying support has come at the psychological level. But the index has formed a lower high and lower low candle, and we cannot assume that the bottom is in place unless the higher close candle confirmation. Banking and financial services stocks primarily led the recovery. The index and broader market breadths are negative. This gives some suspicion as there are very few stocks that managed to close positive.

The Nifty once again failed to sustain opening gains. The only hope for Thursdya is today's hammer candle. Generally, the hammer forms at the bottoms and needs confirmation for the bullish implications. As the channel support is holding for the day and 15992 level will act as an important support for now. The Nifty has to close above the prior high or above 17400. At the same, it should have a follow-through day with higher volume.

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