Nifty closing confirms southern Doji
Daily RSI is still not in the oversold zone. If Nifty opens with a gap up on and closes above the opening will be a first rally attempt effort; short-term bounce is likely, it is better to avoid positional trades and trade on the decisive trend signals only, as the volatility is high
image for illustrative purpose
As the global markets were trading weaker, the domestic equity benchmark indices were under pressure. The Nifty declined by 109.4 points or 0.67 per cent and closed at 16301.85. The Nifty Media, Energy, and PSU Bank indices declined by over two per cent. The other sector indices declined by 0.3 per cent to 2 per cent. Only the Nifty IT index advanced by just 0.05 per cent. The Nifty breadth was negative as 30 stocks closed with a negative bias. The broader market breadth is also negative as 1649 declines and 518 advances. About 112 stocks hit a new 52-week low, and 160 stocks traded in the lower circuit. Campus, HDFC Bank, and Reliance were the top trading counters on Monday.
NSE Nifty closed below the previous day's low and gave a confirmation to southern Doji's bearish implications. It opened with a negative gap down and formed an evening star candle at the bottom. But, the opening low was protected and bounced over 150 points from the day low. At the same time, the index protected the 16200 support on a closing basis. The 78.6 per cent level (16194) tested and closed above. In any case, the Nifty opens with a gap up on Tuesday and closes above the opening will a first rally attempt effort. On a lower time frame, the index has formed high candles. The hourly MACD line moved above the signal line and was given a first positive signal. From now the downside risks are limited. During the Rally Attempt period, the 16600-895 zone will act as crucial support. A close above 16608 in the next two days will confirm another upswing. This swing will test 17361. But, the condition is it has to close above the 16350.
The daily RSI is still not in the oversold zone, and does not have any divergences. But, on an hourly chart, it has hidden divergence and bounces from the oversold zone. The hourly MACD has given a buy signal below the zero line. This setup can lead to a short-term bounce. So, it is better to avoid positional trades as the volatility is high. As the distance between key moving averages increases, there can be some bounces, leading to hit the stop losses on both sides. So, better trade on the decisive trend signals only.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
