Nifty chart flags strong negative signal

After Friday’s Shooting Star candle, Monday’s negative close is not a bullish signal. It is a strong negative signalwhen a bearish engulfing candle appears at high. The Nifty failed to close above 23,000 level after two attempts. Importantly, the Nifty hit new highs for the last 3 days with a negative advance-decline ratio

Equities were nervous before the derivatives expiry and the event risk. NSE Nifty traded in the 239.60-point range and finally closed at 22,932.45 points, down 24.65 points or 0.11 per cent. The PSU Bank index was the top gainer with 1.33 per cent rise. Realty, Smallcap, Midcap, and Bank Nifty closed with above 0.60 per cent gains. On the downside, the Media and CPSE indices declined by 0.97 per cent and 0.95 per cent, respectively. All other sector indices were gained or lost by less than half a per cent. The India VIX was up by 6.83 per cent to 23.19. The market breadth was negative as 1,529 declines, and 1,125 advances. About 148 stocks hit a new 52-week high, and 118 stocks traded in the lower circuit. Cochin Shipyard, RVNL, HDFC Bank, and HAL were the top trading counters on Monday, in terms of value.

Nifty hit another lifetime high for the third straight day. It tested the rising channel resistance on Monday and reacted. Now, it is important to close above the crucial resistance of 23,112 for the continuation of the trend. The reaction from the resistance is sharp as the profit booking was high. The index closed near to the day’s low. The Nifty declined by 239 points from the day’s high in the afternoon session, providing the signal for counter-trend consolidation before the election results. As the event risk is just a week away, and the monthly expiry is just three days away, equities traded nervously.

The volume trend shows that participation is on the lower side, and traders interested book profits at higher levels. After Friday’s Shooting Star candle, Monday’s negative close is not a bullish signal and the RSI too was in flat to negative zone. The index almost formed a Bearish Engulfing candle. When a Bearish Engulfing candle appears at the high, it is a strong negative signal. The Nifty failed to close above 23,000 level after two attempts. Importantly, the Nifty hit new highs for the last three days with a negative advance-decline ratio. For now, the 23,000-23,150 is a strong resistance zone, and the 22,800-22,575 is a crucial support area. Stay cautious in this zone. We may see some knee-jerk reactions in these areas.

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