Nifty forms 3 consecutive lower high candles on hourly chart

The benchmark index bounced above the 17100 level with buoyant global markets and the short covering. The beaten-down IT and FMCG sector indices rose by a percentage point each. The Nifty gained by 177.90 points or 1.05 per cent and settled at 17136.55. The Auto index is the top gainer with 2.2 per cent. Infra index up by over one per cent. The Media, Metal and Bank Nifty closed with less than half a per cent. The India VIX also declined by 5.58 per cent. The market breadth recorded 1:1 as 1086 advances and 1083 declines. About 68 stocks hit a new 52 week high, and 91 stocks traded in the upper circuit. HDFC Bank, Reliance and Infosys were the top trading counters today.

The Nifty has formed an inside bar and closed below the 50 and 200DMAs. The Inside bar is generally a continuation candle. The prior bar, high and low, will work as resistance and low. So, the 16824-17276 range is crucial for now. The index traded in a very tight without much volatility. We expected this kind of bounce after over a six per cent fall in just 9 sessions. Tomorrow is crucial as the weekly derivative expiry is in place. The market may see a higher volatility trading day. As long as this pullback is below the 17275-17317 zone of resistance, it is better to trade with caution. A close above 17317 will test the 17470. Beyond this, we can forecast the market movement on the upside.

But, on a bear case scenario, if the Nifty declines below the 17000, the fall will resume towards 16600. Because of some heavyweight stocks rally, the benchmark index is able to close with over a percentage gain. The market breadth has not improved much. The rally in the global market last night helped the index to be in positive territory. On an hourly chart, the Nifty has formed three consecutive lower high candles, and it is still trading below the moving average ribbon. The negative histogram also increased, even after today's positive close. Let's wait for a confirmation of inside bar implications. Otherwise, the 450 point range will continue till this weekend. But, avoid aggressive positions on either side.

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