Nifty forms Doji reflecting inherent weakness

Before the financial results, the IT stocks dragged the market. With the 1.41 decline of the Nifty IT index, the benchmark closed lower by 0.62 per cent at 17674.95. The Nifty Energy index is the top gainer with 2.63 per cent. Media and Realty indices are up by 1.36 per cent and 1.13 per cent, respectively. Bank Nifty and Fin Nifty are down by 0.37 per cent and 0.57 per cent, respectively. Overall, the market breadth is positive as 1195 advances and 922 declines. But, the Nifty breadth is negative as 30 declines. The VIX is up by 3.29 per cent. About 103 stocks hit a new 52-week high, and 154 stocks traded in the upper circuit. Today, Ruchi Soya, HDFC Bank, and Infosys were the top trading counters.

The Nifty traded within the previous day's range, as we expected. It opened lower and sustained the losses. The recovery efforts are ineffective as the buying support is missing at the higher level. The Nifty traded mostly in the first hour's range. The momentum is missing as it is lowest in the last six days. As the Nifty opened in the negative zone, the previous week's Doji candle got the high probability confirmation for the bearish move for this week. The index closed below the 8EMA, trading in the 128 points range. The distance between 50DMA and 200DMA further narrowed to less than 14 points. Another day of negative close will result in the 'Death Cross', a bearish signal. On a 75 minute chart, the index has formed a lower high and sustained below the short-term averages. As stated yesterday, a close below the 17600 will further weaken the market strength. As the Nifty had already broken the rising wedge pattern and closed below the Doji candle on the weekly chart indicated an inherent weakness present in the market. The 17600-17843 zone will be crucial for Tuesday. Either side breakout will lead to a sharp move. Stock specific-activity will be in focus as Q4 results season begins.

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