Nifty forms a perfect Doji candle

The benchmark indices registered a third successive positive closing as NSE Nifty gained by 70.70 points or 0.32 per cent and closed at 21,910.75 points. The CPSE and PSU Bank indices were the top gainers with 3.33 per cent and 3.27 per cent. The PSE index also gained by 2.92 per cent. The Nifty Energy and Auto indices were up by 1.75 per cent and 1.35 per cent. The FMCG, down by 0.96 per cent, is the top loser. Pharma and Media indices close with minor losses. All other indices gained by less than one per cent. The market breadth is positive as 1,635 advances and 900 declines. About 142 stocks hit a new 52-week high, and 154 stocks traded in the upper circuit. Vedanta, HDFC Bank, NHPC, and SBI were the top trading counters on Thursday in terms of value.

The short-covering in banks and some PSUs led to the recovery in the broader market for the last three days. The Private sector bank index recovered over three per cent. The PSE and CPSE indices gained over nine per cent and traded at new highs. The Nifty closed above the prior day’s high and formed a perfect Doji candle. The index has registered a three-day winning streak, which is a signal for regained bullish strength.

After testing the 50DMA, the benchmark moved 1.05 per cent above the 20DMA. It was also bounced from the rising channel support. The bounce on Wednesday has given confidence to bulls. But on the derivatives expiration day, the index once again formed an indecisive candle with low volume, creating an element of doubt on sustaining the bullish strength. However, there are more concerns about recovery. The Relative Strength declined today compared to the Nifty-500 and further moved below the 21EMA. The RSI is still in the neutral zone. If the RSI shift its range into the strong bullish zone above 60, with a big bullish candle and huge volume, expect the new high. It will eventually erase all the doubts. As mentioned earlier, it is in the broader range of 21,137-22,126 points. It must break on either side for a clear directional move. The new high is just 204 points or 0.92 per cent away. In this scenario, a close below the previous day’s low will be negative and dampen the sentiment. For now, stay with a positive bias. A negative opening and negative close will prolong the consolidation.

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