MACD indicates fresh bearish signal
Nifty formed a lower high and lower low candle with higher volume than the previous day; It has also formed a Dragonfly Doji candle, which also indicates the exhaustion in the trend
image for illustrative purpose
The equities ended on a flat note after a strong close. The Nifty closed with 8.70 points down and closed at 22453.30. The Nifty Media index is the top gainer with 1.85 per cent, followed by the Metal index with 1.50 per cent. The Realty and Auto indices were up by 1.21 per cent and 1.07 per cent, respectively. The Nifty IT index is the top loser with 0.71 per cent. Pharma and FinNifty are down by 0.12 per cent and 0.26 per cent. The CPSE and PSE indices up by 1.67 per cent and 1.34 per cent, respectively. All other indices were closed with decent gains. The India VIX is down by 3.56 per cent to 11.65. The market breadth is positive as 2008 advances and 615 declines. About 112 stocks hit a new 52-week high, and 318 stocks traded in the upper circuit. HDFC Bank, ABFRL, BEL, and SAIL were the top trading counters on Tuesday, in terms of value.
The Nifty has formed a lower high and lower low candle with higher volume than the previous day. By closing lower, the index has given weaker signals. The previous day’s shooting star candle failed to get a clear confirmation for its bearish implications, as the Nifty flat to negative. The Index has formed a dragonfly doji candle, which also indicates the exhaustion in the trend.
As we suspected yesterday, the volume-positive closing was not sustained today. On a flat closing, the volumes were higher on Tuesday. Just a day after the RSI is back into the neutral zone. The RSI has not improved and is still crawling around the 60, even on the hourly chart. The hourly MACD has given a bearish, as expected on Monday.
The heavy-weight HDFC bank has protected the Nifty and Banknifty from a big fall on Tuesday as it broke out of the bullish pattern. Now, the major concern is the VIX. It declined to below the 12 zone, which is an indication that something big negative in the market is coming up. Expect an impulsive downside move to have the highest probability. The index reached an overvalued as the PE ratio reached above 24, at the 2008 level. The index also shows exhaustion in the trend. Now, the nearest support is at 22,336, which is a 23.6 per cent retracement level of the prior upside swing.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
