Nifty forms a lower high and lower low candle

The equity market shows an exhaustion, as suspected and closed negatively. The Nifty declined by 48.20 points or 0.25 per cent and closed at 19395.30. Only the Nifty Realty index is the top gainer by over 1.23 per cent. The Nifty Auto index is up by 0.83 per cent. Banknifty and midcap indices closed with modest gains. All other sector indices closed with 0.1 per cent to 0.9 per cent declines. The India VIX closed below 11. About 112 stocks hit a new 52-week high, and 106 stocks traded in the lower circuit. Reliance, HDFC Bank, PFC, and Adani Power were the top trading counters today in terms of value.

The Nifty has formed a lower high and lower low candle and closed below the previous day’s low. The Index declined by 0.25 per cent with higher volume than the prior day and registered a distribution day. As the fall was sharp and impulsive two weeks ago, the Nifty has undergone a counter-trend consolidation for the last two weeks. A 61.8 per cent retracement level retraced this pullback rally, and struggling to move above this important resistance.

After two days of testing, the index reacted and closed below the previous day’s low. Now, the 19463 has become a strong resistance. Only a close above the 19463 will give strength to the pullback rally. It has to close above the prior swing high of 19849 to reverse the trend. Below this, all the pullbacks are considered counter-trend consolidations. The Nifty also closed below the 20DMA and formed a bearish engulfing candle. The price pattern is the first sign of a reversal. In any case, the index closes below 19316, confirming the resumption of a downtrend. Now, the opportunity on the long side is minimal. Stay on neutral to negative bias from now.

(The author is a Chief Mentor, Indus School of Technical Analysis. Financial Journalist, Technical Analyst, Trainer, Family Fund Manager 83740 55588)