Nifty forms lower highs and lower lows
Benchmark index didn’t sustain at opening highs and closed below the opening level; It also closed at the day's low; Volume declined further
NSE Nifty and Bank Nifty failed to sustain the big positive gap-opening gains. Both indices formed bearish candles at the swing high. The Nifty maintained above the 18000 level and closed at 18035.85 and gained just 20 points. The Bank Nifty declined by 99.70 points or 0.24 per cent.
Both, private bank and PSU bank indices closed negatively. The FinNifty, Auto, and FMCG indices declined. The Nifty IT, Metal and Realty indices were the top gainers with 1.23 per cent to 1.62 per cent. The other sector indices closed with modest gains. The India VIX is at 12.89 is near the historical lows. The Advance-Decline ratio is at 1.29, in favour of advances. About 84 stocks hit a new 52-week low, and 64 stocks traded in the lower circuit. Reliance, TechM, and Indigo were the top trading counters today in terms of value.
The Nifty opened with a big gap-up and traded above the 50DMA during the day. But, with the last 30 minutes of selling pressure, It filled the opening gap and closed below the 50DMA. It formed a strong bearish candle that resembles an evening star at the slopping trend line resistance. If the breakout happens on a weekly closing basis, the Nifty can test 18265 in a faster manner. But in any case, the Nifty opens with a gap-down and closes negatively, which will confirm the bearish implications. On an hourly chart, the index has formed lower highs and lower low candles, as it did not sustain at opening highs and closed below the opening level. It also closed at the day's low.
It declined over 134 points from the day’s high. The last 30 minutes’ volume is higher and indicates the distribution. Volume declined further. The positive point is that the Nifty is still above the 20-week average, and the MACD histogram shows bullish momentum. And the RSI is above the 55 zone. For the immediate term, today's high will be a crucial resistance. If it fails to move above the 18135, we may see some retracement towards 20DMA (17856). In such a case, today's move can be considered a failed breakout. The index is sustaining below the 50DMA since December 22. The 20DMA is still flattened. For an uptrend to continue, the 20DMA has to be in an uptrend. The immediate support is at 17950 points and today's low (18000) is also a support. Below this zone, the index may test the 17856 in the sharp move.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
