Nifty facing resistance at 10-week average

The benchmark indices rallied for the second successive session, with broader market participation. NSE Nifty gained by 117.10 points or 0.67 per cent. The Nifty Energy and IT indices were the top gainers, with 1.93 per cent and 1.22 per cent, respectively. The Realty and PSU bank indices declined by 0.52 per cent and 0.23 per cent, respectively. All other indices gained 0.1 per cent to 0.9 per cent. The market breadth was positive as 1,205 advances and 736 declines. About 46 hit a new 52-week high, and 89 stocks traded in the upper circuit. Adani Enterprises, Adani Ports and HDFC Bank were the top trading counters today in terms of value.

As we expected, the Nifty tested the gap area resistance and filled the gap. It closed above the 20DMA too. After opening with a positive gap, the Nifty sustained the initial gains. But it did not stay at the higher levels and declined by almost 90 points from the day’s high. It formed a Shooting Star candle, which is bearish in nature when it forms at a swing high. As forecasted, the index has tested the 61.8 per cent retracement level. Generally, the pullback rallies in a downtrend end at 61.8 per cent retracement levels. Only in case of moving above today's high of 17800 will be positive. If the Nifty closes negative in the trading session, the Shooting Star candle will get a confirmation for its bearish implications. The RSI is back to the above 50 zones, and the MACD line is about cross the signal line. A move below 17644 will be more negative. Today, the index faced resistance at a 10-week average also. As mentioned earlier, the confluence of resistance worked well for now. We need to get the confirmation for a reversal now by closing below today's gap area.

(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)