Nifty forms bearish Engulfing candle

As the event risks loomed over, the equity markets traded nervously. Tuesday's breakout was not sustained for the second day. The NSE Nifty closed at 18,082.85 with 62.55 points or 0.34 per cent decline.

The Nifty Pharma, Energy and Media indices were closed with half a per cent gains. All other indices closed with marginal losses. The realty was down by 0.80 per cent, and the Auto index declined by 0.74 per cent. All other sector indices closed with less than 0.50 per cent losses. The Market breadth is 1:1 as 923 advances and 953 declines. About 50 stocks hit a new 52-week high, and 88 stocks traded in the upper circuit. LIC Housing Finance, Mazdock Ship, and Reliance were the top trading counters on Wednesday in terms of value.

The Nifty has formed a bearish engulfing candle at a swing high. It confirmed the previous day's hanging man candle's weaker signal. If the Nifty closed below today's low of 18048, the engulfing pattern would get the confirmation for the reversal. In fact, the Nifty formed a lower-low candle. Yesterday's breakout did not sustain above the 18115 level.

Before Wednesday's Federal Reserve meeting and Today's Reserve Bank of India's monetary policy meeting, the equity markets are trading cautiously. The Nifty witnessed profit booking at the swing high. The index almost filled the previous day's gap. It has broken any support as of now. As mentioned earlier, there are no bearish signs, but a profit booking before the event risk is common. A retracement below 17969 is negative. Any further decline below the 17890-840 zone is bearish. On an hourly chart, the Nifty is still above the moving average ribbon. The support is at 17937. For now, it is better to book the profits on the table and be in sideways. Any adverse commentary above the expected level of a rate hike will dampen the market's sentiment.

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