Nifty forms bearish belt hold candle

With the positive result in favour of BJP in recent Assembly elections, and easing of the Ukraine crisis, the domestic equity markets continued to close higher for the third consecutive day. NSE Nifty ended at 16594.90 with 249.55 points or 1.59 per cent gain. The IT and the CPSE indices closed with 0.12 per cent, and 0.84 per cent declines, respectively. The FMCG index was the top gainer with 3.03 per cent. Metal, Realty, PSU Bank indices gained by over 2.2 per cent. All the other sector indices are up by 0.14 per cent to 2 per cent. The Market breadth is positive as 1457 advances and 626 declines. About 35 stocks hit a new 52 week high, and 292 stocks traded in the upper circuit.

NSE Nifty closed with positive gains, but erased its opening gains. The benchmark index opened with a positive gap and above the 21EMA and 200DMA. This promising opening was not sustained for only the first hour. Barring Punjab, all the state election results are favourable to BJP. This event risk was favourable for traders also. The weekly expiry also went smoothly. But, the concerns emerged by the closing time. The Nifty closed below the 21EMA and 200DMA, and it formed a Bearish Belt Hold candle, where the opening is the highest level for the day. The daily RSI reached to the channel resistance. The 20DMA is placed at 16815, and the prior breakdown level is 16840. A close above the 200DMA (16692) and above the prior breakdown (16840) will give more confidence to the bulls. As the 200 DMA began trending downside, it needs to flatten or form an upside curve will be more positive for the market.

The immediate target of the index is at 17011 if the Nifty continues to trade positive. Above this level, the index may register a downward channel breakout. But, sustained closings below 200 DMA will show stiffer resistance. In any case, the Nifty closes below 16447 are negative will resume the downtrend. It failed to close above the 38.2 per cent retracement level (16695). As event risk is over and the weekend in place, traders show interest to book profits for the last three days. Importantly, the Nifty needs to close above the 16482 to form a bullish engulfing pattern.

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