Nifty closing indicates indecisive near term direction

The market bounced after a day of retracement. The benchmark index, Nifty, closed at 17,812.70 with a 66.80 points gain. Most of the sectors are subdued today as their gains and losses were limited to less than one per cent. The Bank Nifty and FMCG are the top gainers with 0.67 per cent and 0.61 per cent. The Metal and Infra indices also gained by 0.51 per cent and 0.57 per cent. The Media is the top loser with 0.83 per cent. The Nifty Pharma and Auto indices fell by 0.39 per cent and 0.23 per cent. The market breadth is positive as 1141 advances and 900 declines. About 221 stocks traded in the upper circuit, and 172 stocks hit a new 52-week high.

The Nifty closed higher and formed a long-legged doji, indicating indecision about the near term direction. It took support at 5EMA for the second consecutive day and formed a higher high and higher low bar. It also took support on the channel demand line, drawn by connecting the lows since 20th December. Again the volume is lower today, below the average. On a 75 minute chart, the Nifty has formed a base with parallel lows around 17,655, and it also formed a lower high. This price structure on a lower time frame is nothing but a descending triangle, which has bearish implications if it closes below the 17,655. The index has formed two bases earlier within the upward channel on a 75-minute chart. Both bases are with parallel highs and lows. But, this time, as it formed a lower high, the signs of an up move is at the matured stage. During the current move, the RSI on the lower time frame chart is taking support at 50 zone. There are two indecisive candles at the swing high is also shown that the rally is at a mature stage. As mentioned earlier, a close below the 5EMA (17,723) will give decisive weaker signals. Till then, be with a cautiously positive.

(The author is financial journalist, technical analyst, family fund manager)