Avoid short positions above 17,299pts
The RSI and MACD have formed bullish divergences; Nifty sharply recovered 112 pts from the day's low and formed a Hammer candle, which indicates the short-term reversal; Historically, Nifty rarely formed 8 consecutive bearish candles, and Monday was the 8th session
image for illustrative purpose
The banks and financial stocks protected the market from a more significant fall. Though NSE Nifty closed with 73.10 points or 0.42 per cent negatively, it recovered over 100 points from the day low. Finally, it settled at 17382.70. The Bank Nifty gained by one per cent, and the FinNifty was up by 0.77 per cent. The Realty is up by 2.18 per cent, and CPSE is up by 0.58 per cent. All other indices were closed with considerable declines. The Media and the Metals were the top losers, with 3.89 per cent and 2.39 per cent. All other sector indices are down by 0.4 per cent to 1.95 per cent. The market breadth is not improved and recorded 1597 declines and 380 advances, and the A/D ratio is at 0.30. About 268 stocks hit a new 52-week low, and 111 stocks traded in the lower circuit. Adani Enterprises, ICICI Bank, and Reliance were the top trading counters in terms of value.
The Nifty closed above the 200DMA, though it declined below it in the morning trade. The index sharply recovered 112 points from the day's low and formed a hammer candle, which indicates the short-term reversal. Historically, the Nifty rarely formed eighth consecutive bearish candles, and today is the eighth day. A Hammer at the bottom has the most significant reversal signal. The Nifty has formed a Hammer candle after seven decline days and eight bearish candles. Historically, the Nifty rarely formed eight consecutive bearish candles on a daily chart. Today is the eighth day. So, do not expect further fall as long as Monday's low is protected. A positive close tomorrow confirms the reversal.
The Nifty did not fill the opening gap or closed positively. But the over 100-point recovery gave a positive signal. The RSI and MACD lines, on a shorter period chart, have formed bullish divergences. Volume is higher than the previous day. After the first hour of trading, the Nifty formed a base around 17300 and bounced. The formation at this level is like the double bottom on an hourly chart. A sustained move above 17411 will be positive, and the immediate target is 17470. Above this, 20 DMA will be a crucial level. After confirmation of the Hammer candle, it can be positive for three to five sessions. As long as the Nifty trades above 17299, avoid short positions.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
