Nifty fails to close above resistance level

THE benchmark indices failed to move above the critical resistance level. The Nifty closed higher by 54.75 points at 14,873.80. Selling pressure in the last two hours of trading hit bullish sentiment. The Metals shined again with the sector index up by 3.92 per cent. Banknifty lost 0.63 per cent and FinNifty closed with 0.34 per cent loss. Energy and Pharma indices were down marginally. IT index was up by 1.18 per cent and all other indices were gained by less than a per cent. The Market breadth was positive as 1,233 advances and 668 declines were recorded. A total of 131 stocks hit a new 52-week high.

The Nifty finally traded above the stronger resistance line at 14,880. But it failed to close above the resistance and formed a bearish candle, Gravestone doji or a shooting star candle. After testing the neckline five times, finally, it broke out of a small inverted head and shoulders pattern in the morning, giving a lot of hope for a decisive breakout. During the last four trading sessions, the Nifty gained but lost just 6.45 points, also a doji candle after volatile sessions. On Monday, it had fallen by over 1.5 per cent after testing the bottom range of the last two months, i e., 14,470. Importantly, the Nifty oscillating around 50DMA for the last 14 sessions and finally made a decisive close above it.

The close above the 50DMA are positive for the market direction in the near term. But, the bearish candle at a resistance level is not a good sign. For now, 14,880-984 zone will act as a resistance. At the same time, the 50DMA 14,804 and the 20DMA 14,775 will act as a support zone. Even if, the Nifty closes below today's low of 14,821 will also indicate the fresh weakness in the market. The consolidation between 14,460- 14,880 further continues, if it fails to close above 14,880 once again. On the upside, a close above 14,880 will take the Nifty towards 15,176. Closing below, the 14,821-14,775 is negative and can test 14,469 once again. But, for a medium-term outlook, the Nifty has to breakout the broader 1,000 point range of 15,431-14,469. Unless these two levels are taken out, the market may consolidate and may spend some more time within the range.

(The author is financial journalist, technical analyst, and family fund manager)