Nifty closing on flat note indicates waning bullish trend

THE equity market closed with a flat to negative bias. During the last minutes of the trading, the market bounced back sharply. The Nifty closed with just 2.80 points gain at 15,106.50. None of the indices advanced or declined one per cent. The Banknifty closed with a 0.76 per cent loss. IT, Pharma, Auto and Realty indices closed with a decent gain. The broader indices Nifty Midcap-100 and Smallcap-100 closed in positive territory. India VIX lost 1.31 per cent. The overall market breadth was 1:1 as 919 advances and 971 declines were recorded.

After moving in a 190-point range, the Nifty closed flat and formed another indecisive candle. The long lower shadow indicates the buying or short-covering support helped the index to recover from the lows. It filled the 8th February gap, but failed to close below the previous day low. The last five-minute bar of 190 points indicates some system error because of the algorithms. With this move, a majority of shorts were covered at a stop loss level.

The whole day range was covered in these five minutes. Finally, the Nifty formed a hanging man at a resistance level. It also formed a lower low and lower high bar. It took support at 5EMA.

The price structure of the last three days exhibits the exhaustion trend of the market. The confirmation for the weakness is still elusive. Unless the last three-day range is taken, we cannot trade on either side. Most of the time, the Nifty traded below the previous day low, indicating the weakness. But, in the last 15 minutes, things changed. In the derivative market, the option premiums melted like ice.

As the weekly expiry is on the cards, it is better to avoid trade without confirmation. The negative divergences are still valid. The histogram of daily trade clearly shows the waning of the momentum. Closing below the prior bar low is very important for bears to dominate the market.

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