Nifty forms another bearish engulfing candle

The Nifty declined on a derivative expiry day and snapped the two-day positive bias. It closed at 17522.45 with 82.50 points or a 0.47 per cent decline. The Realty and the PSU Bank indices closed with a positive bias, and all other indices closed in red. Interestingly, the gains and losses in the sectoral indices were limited to less than half a per cent. The PSU Bank and Reality indices gained by 2.74 per cent and 1.47 per cent, respectively. The VIX is up by 6.19 per cent. The market breadth is slightly positive as 989 advances and 896 declines. About 83 stocks hit a new 52-week high, and 108 stocks traded in the upper circuit. RBL Bank, Adani Enterprises and Bajaj Finance were the top trading counters on Thursday in terms of value.

The benchmark index, Nifty, began the week with a big fall and given weaker signals. After getting the bearish confirmations, the Nifty hesitated to fall further, as the monthly expiry is on the cards. In the last five trading sessions, it fell by 434.05 points or 2.42 per cent. Interesting price in the last two days, the traders confused and failed to find the directional trades. During the last two days, Nifty opened with a gap down and recovered the losses and closed positively. It failed to close above the prior day's high.

On Thursday, it opened with a gap up and declined sharply during the last hour of trading. In a nutshell, the index has consolidated for the last two days. But the momentum has been lost. On Thursday, it almost tested the 20DMA support, declining below the 13EMA. It formed another bearish engulfing candle with an added distribution day. In any case, if it closes below the 20DMA or negative on Friday, the daily and weekly bearish patterns get the confirmations of their implications. The RSI is taking support at two prior lows and closed below the 60 zone. The MACD line is below the signal line, and the histogram shows an increased bearish momentum.

Since July first week, the Mansfield relative strength indicator has been sustained below the zero line. At the same time, the RRG RS and momentums are just oscillated around the 100 line. Most of the time, they are below the 100 line. This indicates the underperformance of the index compared to the broader market. Currently, the index is just 3.28 per cent above the 200DMA and 5.84 per cent above the 50DMA. The 20DMA (17483) may act as immediate support. On the upside, today's high of 17726 is the immediate resistance. Only above this Nifty will resume the upside move.

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