Nifty forms Shooting Star candle
The index must sustain above 21,850 for at least the next 2 days to continue the upside move
Once again led by Reliance and IT heavyweight stocks Infosys and TCS, the benchmark indices hit a new lifetime high. NSE Nifty gained 156.35 points or 0.72 per cent and closed at 21,853.80 points. The PSE, CPSE, and Energy indices were the top gainers, with over 3.37 per cent gains. The Metal, PSU Bank, IT and Commodity indices were up by over two per cent.
On the flipside, the Bank Nifty and FinNifty were down by 0.55 per cent and 0.40 per cent, respectively. All other sector indices ended on a positive note. India VIX is up by 1.68 per cent. The market breadth is positive as 1,394 advances and 1,196 declines. About 291 stocks hit a new 52-week high, and 144 stocks traded in the upper circuit. NHPC, NBCC, HDFC Bank, and Reliance were the top trading counters in terms of value.
Surprisingly, the Nifty formed a new lifetime at a high of 22,126.80 points. It filled the 17th January gap and closed at the gap support. The worry is that, the Nifty declined sharply from the day’s high by 273 points is not an ordinary move. It formed a Shooting Star candle, which is negative. Even though it closed above the prior resistance area of 21,834-850, the price action is indicating some caution. First, the bearish candle pattern at a lifetime is a warning sign. Secondly, the impulsive nature of decline with high volume is a big worry. Third, the heavyweight sector index, the Bank Nifty declined by 991 points and formed a bearish engulfing pattern.
The index closed the rising channel’s resistance line, and above the prior week’s high. The weekly volume is also higher. The index has taken support at a 10-week average and bounced. The indicators show a positive bias because of positive closing. The RSI is near the bullish zone, and the MACD line is about to move above the signal line. The bearish momentum is almost waned. Now, the index must sustain above 21,850 for at least the next two days to continue the upside move. A negative close below 21,800 points, will result in profit booking. For next week, the 21,644-22,000 zone will be crucial for directional bias.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
