Nifty forms a bearish Gravestone Doji candle

After hitting a new lifetime high, the Nifty witnessed sharp selling pressure. After trading in a 446.65-point range, the index finally closed at 172.35 points, or 0.76 per cent and closed at 22475.85. The CPSE and PSE indices were positive by 0.50 per cent and 0.46 per cent. Nifty Pharma is able to close with a 0.05 per cent gain. All other sector indices were closed negatively. The Nifty Infra and Realty indices are down by 1.29 per cent and 1.03 per cent. All other indices are down by less than a per cent. The market breadth is negative as 1645 declines and 980 advances. About 147 stocks hit a new 52-week high, and 106 stocks traded in the upper circuit. Bajaj Finance, BHEL, REC, and Kotak Bank were the top trading counters on Friday, in terms of value.

The Nifty’s recent surge in a rising channel is marked by volatility. Price movements and technical indicators lack reliability on both sides of the channel’s up-and-down swings. On Friday, the Nifty hit another new high after a one-day gap. Soon after the new high, the selling pressure was intensified. It finally closed above the 20DMA, which is strong support for the last nine days. The index bounced from the 10-week average again. Only this average acting like a trusted support during the current rising channel. The reason for uncomfortable conditions in an uptrend is that the RSI is not making higher highs. For the last six days, it failed to move above the 60 zone. The bearish divergence, which began in December 2023, is not yet negated. On Friday, the index escaped the distribution day, as the volumes were lower than the previous day.

On a weekly chart, the index has formed a Gravestone Doji candle, which is bearish again. Two weeks ago, the Nifty formed a similar candle without a lower shadow. During the last 72 days of the rising channel, there are more black candles with bigger declines with higher volumes. Friday’s candle has engulfed the four days of price action. Bearish engulfing candles were formed several market tops earlier. In any case, if the index close below the 10-week average of 22339, will be negative. If it closes below the prior week’s low on a weekly basis, the bearish confirmations will emerge.

The VIX’s sharp rise from 9 to above 15 reflects heightened uncertainty. Losing momentum and relative strength across sectors further highlight a fragile market. This erratic behaviour suggests the market may be anticipating a significant event, potentially the upcoming elections. Stay highly cautious. We can control only risk, not the reward.

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