Nifty forms Open High candle

We’re expecting a negative close in January month. For a positive close, it must settle above the 21,732 in the next 3 trading sessions. This means the index must gain 379 points or 1.74%, in 3 trading sessions to erase the historical evidence

What Charts Say?

• 1,421 advances
• 1,077 declines
• 158 stocks hit a new 52 week highs
• 147 stocks traded in the upper circuit
• Nifty is 1.22% below 20DMA
• 20DMA is in a downtrend now

Even after a massive short covering, the indices closed negative. As the long weekend, most of the traders prefer to play safe. NSE Nifty declined by 101.35 points or 0.47 per cent and closed at 21,352.35 points. Only the CPSE index closed with a 1.03 per cent gain. The Nifty IT, Pharma, and FMCG were the top losers in 1.15- 1.60% range. All other sectoral indices gained or lost by less than a percentage point. The market breadth is positive as 1,421 advances and 1,077 declines. About 158 stocks hit a new 52 week highs, and 147 stocks traded in the upper circuit. HDFC Bank, ICICI Bank, NBCC, and Railtel were the top trading counters today in terms of value.

The Nifty declined below the previous week’s low and took support at the 10-week average. It closed negative by 0.47 per cent with a higher volume than the previous day and registered another distribution day by closing negative on a weekly basis, which confirms the previous week’s bearish Engulfing implications.

There were only three trading sessions this week, so the volume was lower than the previous week, but above average volume. The week began with a big bearish bar and failed to sustain the next day’s short-covering gains. Settling below the four-week low, which is a clear sign of reversal. We are expecting a negative close in the January month. For a positive close, it must settle above the 21,732 in the next three trading sessions. This means the index must gain 379 points or 1.74 per cent, in three trading sessions to erase the historical evidence.

The Nifty has formed an open high candle today, which is bearish. The distance from 50DMA is reduced to 1.53 per cent. Currently, it is 1.22 per cent below the 20DMA. The 20DMA is in a downtrend now. The last hour’s short-covering led to a bounce of 152 points. The recovery came from Bank Nifty, which bounced 710 points from the day’s low. We are expecting this short-covering bounce for the last three days. On the hourly time frame, the index has formed a Double pattern. In any case, if it moves above 21,483 level, it will result in a pattern breakout. The immediate resistance is also at a similar place of 21,500 points, which is the prior flat base breakdown point.

Above this resistance, Nifty can test the 20DMA of 21,639 points. Expect more volatile moves next week as the Vote-on-Account Budget is scheduled on Thursday, which is the weekly derivative expiry day. On the downside, the 50DMA of 21,048 will act as crucial and strong support. Below this key support, the market will be in a confirmed downtrend. Stay cautious on both sides for next week.

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