Charts indicate losing steam in rally

Caution On Upside

• 121 stocks hit a new 52-week high,
• 142 stocks traded in the upper circuit
• The current swing is 8 days old
• Nifty closed negative in 3 sessions including today
• Normally, counter-trend pullbacks are limited to 8-10 days
• If Nifty fails to move or close above 19,424 level, the pullback is considered to be ended
• If the index declines below 19329, it’s confirmation of the end of the counter-trend

The equities show exhaustion after eight days of the rally. NSE Nifty closed with just a 5.05-point decline at 19,406.70 points. The Nifty Auto, Realty, and Media indices closed with modest losses. All the indices gained and registered mild gains. The Nifty Pharma index is the top gainer with 1.32 per cent. Other sectoral indices gained by 0.10 per cent to 0.75 per cent. The India VIX is up by 0.79 per cent, closed at 11.19. The market breadth is positive. About 121 stocks hit a new 52-week high, and 142 stocks traded in the upper circuit. JPPower, Idea, RPower, and Suzlon were the top trading counters on Tuesday.

The benchmark index gained marginally today after three days of massive rally. For the second consecutive day, it tested the 20DMA and closed just below it. The Nifty formed a perfect Doji candle, which is an indication of indecision and the market getting topped. It exactly tested the previous day’s high, not successful in closing above it. The RSI has flattened. The MACD has given a bullish signal. The hourly MACD shows the oversold condition and the loss of momentum.

The current swing is eight days old. Out of these eight days, three days closed negative, including today. Normally, the counter-trend pullbacks are limited to 8-10 days. If the index fails to move or close above 19,424 points, we can consider that the pullback has almost ended. In any case, if the index declines below 19329, we will get the confirmation of the end of the counter-trend. On the upside, 19463 is a strong resistance point, which is a 61.8 per cent retracement level of the prior downswing. The prior pullback rally also ended near the 61.8 per cent retracement level on the ninth day. In this background, the index has reached an important juncture. It is a definitive time to be cautious on the upside.

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