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Nifty forms lower high candles

Benchmark index traded in a 174-point range on event risk day and weekly derivatives expiry on lower volatility and lower volumes; Focus on PSU Banks and auto sector stocks as they are showing fresh momentum and relative strength

Nifty forms lower high candles

Negative Market Breadth

  • 1,432 declines
  • 1,122 advances
  • 251 stocks hit a new 52-wk high
  • 137 stocks in upper circuit
  • Bollinger bands absolutely flat

The event risk did not impact the equities much. NSE Nifty declined by just 28.25 points or 0.13 per cent and closed at 21,697.45 points. The PSU banks were in the limelight. The PSU Bank index, which gained by 3.11 per cent, is the top gainer. The Auto and Small-cap indices are up 0.53 per cent and 0.63 per cent, respectively. The Metal and Media indices are down by 1.09 per cent and 1.03 per cent, and Realty is also down by 0.94 per cent. All other sector indices gained or lost by less than 0.9 per cent. The market breadth is negative as 1,432 declines and 1,122 advances. About 251 stocks hit a new 52-week high, and 137 stocks traded in the upper circuit. Indus Tower, HUDCO, IRFC, and HDFC Bank were the top trading counters on Thursday in terms of value.

The Nifty was traded in a 174-point range on event risk day and weekly derivatives expiry. It witnessed relatively lower volatility and lower volumes, much lower than the previous day. The Nifty closed below the opening level and ended flat. No trend change implications exist as the index is still in the range and below 21,834 points. One day up and one day down during the last five days indicates the market is indecisive about breaking out of the range. As we expected earlier, the consolidation will continue for some more time. Only in the case of the Nifty breaking the 21,137-21,850 zone will it result in a decisive directional trend.

The index hinted at an internal strength by forming a higher high and higher low candle. After two weeks of negative close, the bears failed to drag the market for the third successive week. At the same time, the Nifty did not close negative for four consecutive days. For a strong a bearish strength, at least four to five consecutive days are required. It closed above the 20DMA for the second day. The Bollinger bands were absolutely flat. If the index closes above 21,850, it can fill the 17th January gap area by testing 22,032. But in any case, closes below the 20DMA of 21,628 will be negative and will resume the downside move. After the first hour of trading, the index formed lower high candles and closed near the day’s low. As the event risk is over, be with a neutral bias. Focus on PSU Banks and Auto sector stocks as they are showing fresh momentum and relative strength.

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

T Brahmachary
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