Charts indicate bleak outlook
Protect the profits on the table as a negative close after the Doji candle is the confirmation for its bearish implications
image for illustrative purpose
The IT and Bajaj Fin twins dragged the benchmark index into the negative territory. NSE Nifty declined by 49.20 points or 0.22 per cent and closed at 22,356.30 points. The Auto and the CPSE indices were the top gainers with 1.35 per cent and one per cent, respectively. The PSU Bank index was up by 2.56 per cent and led the Bank Nifty. Nifty IT index declined by 1.59 per cent and is the top loser. The FMCG and media indices also declined by over one per cent. The Bajaj finance twins declined by over 4.2 per cent. The India VIX is also down by 3.64 per cent to 14.38. The market breadth was negative as 1,720 declined and 882 advanced. About 109 stocks hit a new 52-week high, and 145 stocks traded in the lower circuit.
Tata Motors, HDFC Bank, BHEL, and Aavas Finance were the top gainers on Tuesday in terms of value.
The Nifty closed below the previous day’s Doji low with an increased daily range. Though it recovered from the day’s low, with this negative close, the Doji candle got the confirmation for its bearish implications. It also formed a lower high and lower candle. It filled the Saturday and Monday gap. Tuesday’s price action has formed a hanging man candle. Two consecutive reversal candles - Doji and Hanging Man indicate a possible retracement. The index closed on the rising trendline, with prior resistance.
On Tuesday, the Nifty escaped the distribution day. The RSI declined by two points, and the MACD showed waning momentum. The Elder’s impulse system has formed a neutral bar. The ‘V’ shape recovery on the hourly chart was not sustained on a closing basis. For an uptrend to continue, the index must close above the Doji candle close of 22,406 to negate its implications. In any case, if it closes negative, the downside move will continue. The nearest support is 8EMA at 22,256 points, which is also prior to the rising channel line. As stated earlier, it is time to protect the profits on the table.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
