Hanging Man candle shows trend exhaustion
Market may experience increased volatility as Weekly expiry and the RBI policy are scheduled for today
image for illustrative purpose
The equities recovered from the opening weakness. Though the global markets were closed negatively, the domestic market was able to close positively. The Nifty ended with 42.70 points gain at 17388.15. The decline in open interest shows some unwinding of positions.
Only Nifty IT was able to close above 1.35 per cent. Fin Nifty, Energy indices gained just 0.7 per cent. The Nifty Auto, Pharma, and Realty indices are down by 0.76 to 0.80 per cent. The other indices are down by less than a per cent. The broader market index, Nifty Midcap-100 is down by 0.70, and the Smallcap-100 index declined 0.48 per cent. The broader market breadth is also negative as 1244 declines and 631 advances. About 48 stocks hit a new 52-week high, and 76 stocks traded in the upper circuit.
After a volatile trading session, the Nifty has been closed higher for the last three days. The long lower shadows show that the dips were bought. But, at the same time, the Hanging Man candle also shows the exhaustion of the trend. It is required to get confirmation by closing below the previous day's low. The Nifty closed at the day high and at the previous day's high is a stronger sign. It formed a hanging man candle.
The volume jump in the last 30 minutes is a surprise, as the open interest is declined. The index breadth is exactly 1:1. With a lower volume, flat breadth, and lowered momentum indicate that the market is waiting for a trigger. The positive thing is that the weekly RSI closed above the prior swing high. Absolutely no indicator is showing a weaker sign. If the Nifty sustains the positivity, it can test the 17414 - 457 zone of resistance, which is nothing but a gap area. Only in case the Nifty closes below the previous bar low or forms a decisive lower high lower low candle can it give us the signal that the trend is entering into the consolidation. Weekly expiry and the RBI policy are scheduled today, so the market may experience increased volatility.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
