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Nifty forms bearish engulfing, belt hold candle

The price action looks very bearish, if we consider yesterday's one-hour session plus Tuesday’s one-trading session

Bulls losing hold on the trend

Bulls losing hold on the trend

The Muhurat trading positive vibes were erased on Tuesday with a negative breadth and renewed selling pressure. The NSE Nifty was down by 74.40 points or 0.42 per cent and closed at 17656.35. The Auto and IT indices were the top gainers, with 1.24 per cent and 0.66 per cent, respectively. The Pharma and metal indices are up by 0.40 per cent each. The FMCG and Energy indices were down by over one per cent. Fin Nifty, Realty, and Media indices declined by over 0.50 per cent. The Bank Nifty was protected by PSU banks as the PSU bank index was up by 3.50 per cent. The market breadth is negative as 1213 declines and 679 advances. About 49 stocks hit a new 52-week high, and 58 stocks traded in the upper circuit. ICICI Bank, Reliance and Axis Bank were the top trading counters on Tuesday, in terms of value.

The Nifty has formed a strong bearish engulfing and bearish belt hold candle. It filled yesterday's gap area and closed almost near to the day low. The Autos and IT sectors protected the day from a bigger fall. Even if we consider yesterday's one-hour session plus Tuesday's one-trading session, the price action looks very bearish. The Nifty has formed an open high candle. It closed below Friday's high. The Nifty is closing lower than opening highs for the last three sessions. Though it is still above the channel resistance line, the price action is giving a conviction to have a bullish bias. The RSI is below the 60 zone in all time frames. On an hourly chart, the Nifty has formed a hidden divergence, and the RSI closed at the crucial support. In any case, a decline below 50 means bulls is losing their grip on the market. Other than this, there are no major technical developments on the daily chart. It is still above the short-term average, 5EMA. It is trading 2.58 per cent above the 20DMA and 0.88 per cent above the 50DMA. The 17503-248 (50 and 20DMA levels) are crucial supports on the downside. The momentum is flattened. For now, today's high of 17811.50 is the strong resistance. As long as the Nifty trades below this level, you better avoid fresh long positions. Keep a stop loss at 17503 for existing long positions. Only below 50DMA will we get the weaker signals.

(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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