Charts indicate bearish bias
The MACD and True Strength Indicator (TSI) have given a fresh sell signal; Nifty closed at a 6-day low and met 50% of the wedge breakdown target; Previous day’s bearish engulfing candle got the confirmation; It also closed below 18,194 pts and gave clear weakness signals
image for illustrative purpose
The equities extended losses for the second consecutive day as NSE Nifty declined by 104.75 points or 0.57 per cent and closed at 18,181.75 points on Wednesday. Only Nifty Auto and FMCG indices were up by 0.09 per cent and 0.06 per cent, respectively. The Nifty IT index is the top loser with 0.97 per cent. All other indices declined by 0.3 per cent to 0.9 per cent. The India VIX also declined by 1.41 per cent to 13.10. Market breadth is negative; the advance-decline ratio is at 0.80. About 76 stocks hit a new 52-week high, and 49 stocks traded in the upper circuit. HDFC Bank, ICICI Bank, and SBI were the top trading counters today in terms of value.
The Nifty has decisively broken the rising wedge pattern and an upward channel. It closed at a six-day low and met 50 per cent of the wedge breakdown target. With today’s fall, the previous day’s bearish engulfing candle got the confirmation for its implications. As we expected, it also closed below 18,194 points and gave clear weakness signals.
The Nifty registered a second consecutive distribution day. It declined below the 8EMA today. The distance between Nifty and 20DMA has now reduced to just 0.68 per cent. As the mean reversion is going on, it is common to test the 20DMA of 18,052 in the near term. The Elder impulse system has formed another neutral bar. By closing below 18194, it made a minor low. The RSI has also got the confirmation for bearish implications of negative divergence, as it closed below the prior swing low.
It declined below 60 and entered into a neutral zone. The MACD and True Strength Indicator (TSI) have given a fresh sell signal. With the short covering in the last hour, the Nifty recovered 66 points from the day’s low. Now, only a move above today’s high of 18,309 points will be positive. As the weekly derivatives expiry is in place, expect volatility and smaller pullbacks. On the downside, the 18,089-52 zone is a crucial support for now.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
