Mkts await trend reversal for decisive direction
Nifty formed a Shooting Star and formed a bearish candle at the confluence of high implications; MACD line and signal are simultaneously moving together, RSI is rising in bullish zone
image for illustrative purpose
With the influence of the global market’s buoyancy, the domestic markets rallied further. NSE Nifty gained by 59.75 points or 0.32 per cent and finally closed at 18,593.8 points. Nifty Auto index is the top gainer with 1.26 per cent. The FMCG and IT indices declined by 0.45 per cent and 0.30 per cent, respectively. Barring the Auto index, all the sectoral indices limited their gains to less than 0.40 per cent. The market breadth is positive as the advance-decline ratio is at 1.48. About 153 stocks hit a new lifetime high, and 125 stocks traded in the upper circuit. Mazdock, HDFC Bank and Axis Bank were the top trading counters on Monday in terms of value.
As we forecasted, the index closed higher and tested the previous closing high. It opened with a positive gap, but failed to sustain at the higher levels. Its trade range was mostly limited to the first price action. It closed below the open and formed a shooting star. At the confluence of high, the bearish candle is the bad omen for the direction. As our previous experiences have proven wrong, as bearish candles failed to get a confirmation for their implications, we need to wait for a reversal bias. The positive factor is the index sustained above the previous day's high. The 8EMA and the upper Bollinger band are in the uptrend.
The MACD line and signal are simultaneously moving together. The RSI is rising in the bullish zone. In the Bull case scenario, the Nifty can test 18,663, if Monday’s gap is sustained. For a decisive directional bias, the previous week's high and low of 18,662-464 is crucial. As the VIX is declining, the market is not in a hurry to test the all-time high. If it closes above 18,662, the nifty will form a new lifetime high. A close below 18,464, the 20DMA of 18,377 is the next support. It is better to be positive as long as it trades above 18,507. We may get the bearish signals only below this. Stay focused on defence stocks and automobile stocks. The RBI monetary policy is scheduled in the week; the indices may trade cautiously.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
