Higher probability to test 16962 level
Opening at high and closing near to the low is a character of a bear market. It is better to avoid the long positions until it reaches the pattern target
image for illustrative purpose
The benchmark indices closed in the red zone for the third consecutive day. It also closed below the previous day low. The NSE Nifty lost 103.50 points or 0.60 per cent and settled at 17221.40. The Nifty Auto index is the sole gainer in Wednesday's market with 0.49 per cent. All the sectoral indices ended in red. Nifty Realty, Media, Metal, and IT indices declined by 1 to 1.35 per cent. The PSU Bank index also closed with a 1.35 per cent loss. All other indices settled with less than one per cent decline. The VIX up by a 1.56 per cent. The Market breadth is negative as 1231 declines and 848 advances. About 115 stocks hit a new 52 week high, and 195 stocks traded in the upper circuit.
The Nifty declined over 100 points and formed another bearish engulfing candle just in three days. As mentioned on Tuesday, the counter-trend Flag pattern broke on the downside. The pattern targets open to 16962. It almost achieved 50 per cent of the target today. After opening on a flat note, it declined sharply in the first hour, closed near to the day's low. It escaped the distribution day today as the volumes are lower than yesterday. After two consecutive days of distribution, today's price action is not encouraging as the Volatility has increased a bit. On a weekly chart, the index closed below the 20 moving average and formed a dark cloud cover candle. A close below 17511 will be a bearish engulfing candle.
The Nifty has retraced more than 55 per cent of the prior upswing within the downward channel. The 61.8 per cent retracement support is placed at 17177. In any case, the index closing below this level on Thursday will have a serious implication. It will have a higher probability of testing the pattern target of 16962. The MACD line shows flat momentum. Importantly, as the Nifty closed below the prior day low, is a strong bearish signal. RSI is moving around the bearish zone. A move below the 40 zone, will confirm the bear market further. Opening at high and closing near to the low is a character of a bear market. It is better to avoid the long positions until it reaches the pattern target.
(The author is financial journalist, technical analyst, family fund manager)
