Charts signal increased bearish momentum

With the fresh profit booking on Wednesday, the benchmark indices and the recently rallied stocks declined. With this, NSE Nifty closed below the previous day’s low as it closed at 18,285.40 points, a fall of 62.60 points or 0.34 per cent. The Nifty Metal declined by 1.56 per cent. Bank Nifty and FinNifty were also down by 0.63 per cent and 0.80 per cent, respectively. The CNX Pharma is the top gainer with 1.03 per cent. FMCG, Media, and Energy indices gained by half a per cent. The India VIX is up by 4.03 and closed at 13.11. The Advance-Decline ratio is at 1. About 66 stocks hit a new 52-week high, and 65 stocks traded in the upper circuit. Adani Enterprises, HDFC Bank, ICICI Bank, and Dixon were the top trading counters on Wednesday in terms of value.

Two back-to-back Shooting Star candles at the swing hints a caution for the traders. It is undoubtedly time not to be complacent. The VIX is slowly going up, and on Wednesday, it rose by 4.03 per cent. It shows an inverse relation with the benchmark index after many days. This scenario will change the trend bias sooner or later. The Nifty opened with a gap down and recovered in the first hour itself. But during the afternoon session, it witnessed fresh selling pressure at the day’s high and declined sharply by over 130 points. Two consecutive Shooting Star candles at the near previous swing high will have strong implications. The first Shooting Star formed on Tuesday got its confirmation of bearish implications as the Nifty closed below its low. Wednesday’s low has the many supports and resistances earlier. So, the Wednesday’s low of 18,262 will be strong support for today. The next meaningful support is at 18,198, which is 20DMA.

The Nifty has registered a distribution day, as it declined over 0.25 per cent, and the volumes are more than the previous day. The RSI closed just on the 60 and formed another minor high. The negative divergence is still valid in this major indicator. The MACD histogram further increased, showing the increased bearish momentum. On an hourly chart, the Nifty decline below the moving average ribbon and the MACD line is just on the zero line. A move below 18,262 points will give a clear bearish signal. The expiry day will definitely be a highly volatile day. Don’t be complacent about protecting the capital and profit on the table.

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