Nifty forms Shooting Star candle

The benchmark indices declined sharply in the late session, and finally, NSE Nifty closed with 51.45 points or 0.32 per cent loss and settled at 16214.70 points. It declined by over 200 points from the day's high. The Metal index was the worst performer with 8.14 per cent. The Nifty Pharma, Energy, and Realty indices decline over one per cent. All other indices down closed with modest losses.

The market breadth is negative as 1297 declines and 792 advances. About, 45 stocks hit a new 52 week low and 120 stocks traded in the lower circuit. Tata Steel, Reliance and HDFC Bank were the top trading counters today.

The positive sentiment continued for the second day initially and tested the 16400 resistance, as expected. The MACD line crossed the signal line during the day and signalled bullish bias. As the rally is news-driven, the volume is very thin. But the opening bullish sentiment was not sustained in the afternoon session.

The sudden sharp selling pressure forces the index to form a bearish Shooting Star candle. It closed below the opening level and indicated that Friday's rally is a bear market's countertrend surge. The selling volume in the last two hours is very high and indicates the distribution. The Open Interest also rose and gave the signal of fresh shorts built up.

Only the metal index was in red at the opening, but the end of the day, only IT and Auto indices were able to close in positive territory. Even the market breadth also turned negative in the afternoon session.

As the volatility increased, the VIX surged to 23.39 from a low of 20.50. As NSE Nifty formed another parallel high at 16400, it is better to wait to cross this to take the long positions. As of now, the market has gone into bear's grip again. Better avoid long positions for now.

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