Charts indicate trend exhaustion

The hourly ascending triangle breakout target is at 25,180 level. The index may test this level in the bull case scenario. On the downside, a close below the 8EMA of 24,729 is negative. A decisive close below this level with a high volume, the index may take support at 20DMA of 24,531pts

Positive Market Breadth :

♦ 1444 advances

♦ 1271 declines

♦ 146 stocks in upper circuit

♦ 206 stocks hit a new 52-wk high

♦ Dragonfly Doji candle on weekly charts

♦ Formed ascending triangle on hourly chart

The equity benchmark indices closed at a new high, but failed to create a new lifetime high. NSE Nifty gained 121.65 points or 0.49 per cent and closed at 24,940.25. The Pharma index is the top gainer with 1.07 per cent. The Healthcare and Commodities indices gained by 0.96 per cent and 0.95 per cent, respectively. The PSE Bank index declined for the second consecutive day by 0.50 per cent and is a top loser with 0.31 per cent. The Realty and Small-cap indices are 0.31 per cent and 0.26 per cent. All other indices are up by less than a per cent. The market breadth is slightly positive as 1,444 advances and 1,271 declines. About 206 stocks hit a new 52-week high, and 146 stocks were traded in the upper circuit. Torrent Power, HDFC Bank, Dixon, Gail and ICICI Bank were the top counters today in terms of value.

Nifty registered a new high close and negated the last two days of nervous weakness. It traded within Monday’s trading zone and formed another inside bar. Because of the inside action, the index has formed an ascending triangle on an hourly chart. The volumes were lower than the previous day. As the index did not form a lower low or a close below the prior day’s low, it has not given any weaker signal. After an impulse move last week, the Nifty has been consolidating for the past three days. The price pattern is like a cup; the last three days of action is a handle. If the index closes above the Monday’s high of above 25,000 points, we will see more upside. As stated earlier, the target is at 25,056 points, but it may be violated.

On a weekly chart, the index has formed a Dragonfly Doji candle, which is an exhaustion of the trend. Expect the counter-trend consolidation if the index fails to continue to close higher. The hourly ascending triangle breakout target is at 25,180 points. The index may test this level in the bull case scenario. On the downside, a close below the 8EMA of 24,729 is negative. A decisive close below this level with a high volume, the index may take support at 20DMA of 24,531 level. On a weekly basis, if the index closes below the current’s low will also give weaker signal.

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