Nifty Forms Evening Star Candle

Any further rally will be considered as an overextension of the rally. An Evening Star candle is an exhaustion pattern. In any case, a gap-down opening will confirm the evening star candle’s bearish and reversal implications

The equities rallied further highs and are just an inch away from the 26,000 level. NSE Nifty gained by 148.10 points or 0.57 per cent and closed at 25,939.05 points. Only Nifty IT declined by 0.51 per cent. All other sectoral indices were positive. The PSU Bank index recovered by 3.41 per cent is the top gainer. The Realty index is gained by 2.23 per cent. The Oil and Gas, PSE, CPSE, and Auto indices gained over 1.5 per cent. The India VIX is up by 7.78 per cent to 13.78. The market breadth is positive as 1,768 advances and 1,066 declines. About 176 stocks hit a new 52-week high, and 155 stocks traded in the upper circuit. HDFC Bank, BSE, Kalyani Jewellers, Idea and ICICI Bank were the top trading counters in terms of value.

The Nifty continued its impulsive rally and met our targets of 25,885 and 25,916 points, as mentioned earlier. The index has met all pattern and extension targets. Any further rally will be considered as an overextension of the rally. It formed an Evening Star candle, opened with a positive gap and closed at a high, trading in a tight 109-point range. An Evening Star candle is an exhaustion pattern. In any case, a gap-down opening will confirm the Evening Star candle’s bearish and reversal implications. The volumes were less than half of the previous day’s volume. This shows the participation levels and fresh accumulation is low at the higher levels. The index closed out of the Bollinger bands for the second day. On Monday, the price is completely out of the bands. The daily and weekly RSI is above 74 levels, which is an overbought condition. Even though there are no significantly weaker signs, caution is warranted at the current levels. The index is overstretched in all parameters. It is better to protect the profit on the table.

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