Nifty forms a strong bearish candle

The bears came back to the market with renewed strength. The benchmark index, Nifty, declined by 24.50 points and closed at 15810.85. But it declined by 243 points from the day's high. The Metal, Pharma and Infra indices were able to close flat to positive with less than 0.3 per cent gains. The IT index is down by 0.70 per cent, and the Media declined by 0.90 per cent.

The other sector indices are down by less than half a per cent. The market breadth is 1:1 as 1,067 advances and 1,043 declines. About 26 stocks hit a new 52-week high, and 108 stocks traded in the upper circuit. Reliance, Infosys, and HDFC Bank were the top trading counters on Tuesday.

The benchmark index reacted from a 50 per cent retracement level. It sharply declined over 240 points from the day's high and formed a strong bearish candle. It broke the sloping trend line of the flag pattern on the hourly chart on the opening gap. But, it registered a failed breakout at the end of the day. The Nifty was almost on the support of 20 DMA again, which placed at 15760.

The nature of the decline is sharp and sudden. As stated earlier, these bear market counter-trend surprise everyone with sharp dips. Now, the Nifty has to decisively close above the 15988, which is a 50 per cent retracement level. In any case, a close below 20DMA, currently at 15760, will resume the downside move.

The Nifty closed below the 23.6 per cent retracement level of the last 12 days' upside move. Below the 20DMA, the next level of support is at 15700.

In fact, technically, the Nifty has ended its counter-trend rally as it is retracing from the crucial resistance level and closes below the first level of support. On an hourly chart, The RSI has formed a hidden divergence. The index closed within the moving average ribbon, and the MACD is about to give a sell signal. For now, exit all long positions. If the Nifty opens below 15770, the bears will take control of the market.