MACD line signals bearish divergence
For an uptrend to continue, the index must close above Wednesday’s high, and it should clear 18,663. On downside probability, it may test 20 DMA of 18,325; The negative divergence RSI is still persists; MACD line is also flattened and has a bearish divergence
image for illustrative purpose
NSE Nifty erased two days of gains and closed in the gap area. The benchmark index declined by 99.45 points or 0.53 per cent and finally settled at 18,534.4. The Energy index is the top loser with 1.41 per cent. The FinNifty, and Metal indices declined by 0.82 per cent, and 0.78 per cent, respectively. The Pharma and Realty indices gained by 0.76 per cent, and 0.58 per cent, respectively. All other sector indices gained or lost by less than 0.50 per cent. The market breadth is positive as the advance-decline ratio is at 1.12. Kotak Bank, Max Health, and HDFC were the top traded counters on Wednesday in terms of value. About 110 stocks hit a new 52-week high, and 67 stocks traded in the upper circuit.
The Nifty filled Monday’s gap and by declining a hundred points. It fell into the Bollinger Bands, as we expected on Tuesday. Metals, Banking, and Financial services stocks dragged the market on Wednesday. The Nifty took support at 5 and 8 EMAs on Wednesday. Wednesday’s fall, with the highest volume in the recent time, shows a serious distribution. The price structure is seriously damaged even though the index did not breach the key supports yet. Opened with a gap down, closed below the two-day low, is not a good sign. For an uptrend to continue, the Nifty must close above Wednesday’s high, and it should clear the 18,663. On the downside probability, it may test the 20DMA of 18,325 points. The prior swing low is at 18,060 points. Closing below this means the uptrend has reversed. The negative divergence RSI is still persists. The MACD line is also flattened and has a bearish divergence. The Elder impulse system has formed a neutral bar after two strong bullish bars. Another negative closing will lead to forming a bearish bar. The recovery efforts in the afternoon session were not sufficient to pare the losses. For now, the domestic market will see the movements of the global markets. Any sharp decline will lead to a reversal in our markets. Keep strict stop losses on both sides.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
