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Nifty forms a hammer candle on daily charts

Momentum indicators are not showing any improvement, so apply neutral strategies and keep an eye on stop losses

Nifty up by 1 pc for the week

Nifty up by 1 pc for the week

Negative market breadth

l 1340 declines

l 1213 advances

l 58 stocks hit a new 52 wk high

l 235 stocks in lower circuit

l 49 stocks touched 52-wk low

l The hourly MACD is below zero

l Bollinger bands flat indicating sideways price action

Rebound in Banks and Financials resulted in overall positive sentiment in the market. The Nifty gained 12.20 points or 0.59 per cent, and closed at 21743.25. The Banknifty is the top gainer with 1.38 per cent, followed by FinNifty with 1.37 per cent. The Nifty Metal index was down by 2.07 per cent, and the Media index declined by 0.03 per cent. All the other sectoral indices advanced by 0.05 per cent to 1.2 per cent. The India VIX is down by 1.59 per cent to 15.80. The market breadth is negative for the second day, as 1340 declines and 1213 advances. About 58 stocks hit a new 52 week high, and 49 stocks touched the 52-week low. And 235 stocks traded in the lower circuit. HDFC Bank, IRFC, NHPC, and Hindalco were the top trading counters on Tuesday in terms of value.

The bears failed to pulldown the benchmark index below the key rising trendline support. For the last 14 sessions, the Nifty closing was positive or negative on alternate days. No decline or advance is two successive days. The Nifty hovering around the 20DMA. The volumes were above average on Tuesday. Even though the indices closed positively, the relative strength is not improved. The momentum indicators are also not showing any improvement. The Mansfield Relative Strength line is much below the zero line. On an hourly chart, the index closed in the moving average ribbon, and the hourly MACD is below the zero line, which is a weak signal. As mentioned earlier, a close below the previous day’s low and rising trendline support will be negative. In fact, it broke the trendline support, but with a sharp upside in the afternoon session, it formed a hammer candle and closed in the channel. The 21575-640 zone of support is critical to sustain the uptrend intact.

The 50DMA support is at 21499, which is 1.13 per cent away from the current price. The Nifty may not breach the 21137-22127 zone this month. As long as it trades within this zone or in the Bollinger bands, apply the neutral strategies. The Bollinger bands are flat and indicate more sideways price action. Stay neutral, and keep an eye on stop losses.

(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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