Nifty forms bearish engulfing candle
The Elder impulse system formed 5 consecutive bearish bars on the hourly chart for the first time since March 2023; MACD line began to decline and the histogram shows a further drop in bullish momentum
image for illustrative purpose
The benchmark indices fell sharply as the profit booking at the swing high. NSE Nifty was down by 112.35 points or 0.61 per cent and closed at 18,286.50 points. The Nifty Auto and FinNifty were the top losers with 0.93 per cent and 0.74 per cent. Barring IT and PSU bank indices, all other sectoral indices closed in red, and the market breadth turned negative after many days. The PSU Bank is up by 0.72 per cent, and Nifty IT is gained by 0.18 per cent; are the only gainers today. All other sectoral indices are down by less than half a per cent. India’s VIX is up by just 0.91 per cent. The breadth is negative as the advance-decline ratio is at 0.97. About 90 stocks hit a new 52-week high, and 59 stocks traded in the upper circuit. HDFC Bank, ICICI Bank, and SBI were the top trading counters today in terms of value.
The equities have given up the previous day’s gains and erased all the positiveness. The Nifty has formed the most bearish candle, where open is high and closed almost at the day’s low. It formed the bearish engulfing candle. At swing high, this is the second bearish engulfing candle in four days. In the last six trading sessions, the index has been moving higher with indecisive or bearish candles. After May 5, it closed below the 5EMA and took support at 8EMA. The Nifty took support at the rising trend line. The Nifty has also formed a rising wedge, which is bearish. If the index closes below today’s low of 18,264 points, it means a breakdown.
The MACD line began to decline, and the histogram shows a further decline in bullish momentum. The RSI clearly developed a negative divergence in the bullish zone; a decline below the 60 zone will result in a sharp sell-off. On an hourly chart, the Nifty failed to close above the prior bar high.
It also closed below the hourly moving average ribbon. The Elder impulse system has formed five consecutive bearish bars on the hourly chart. This is the first time after March 2023. For now, only in case moving above today's high of 18,432 is positive. Below 18,264 is negative, and it can test the 20DMA of 18026. There is a lesser possibility of forming an inside bar. Avoid long positions, and look for a breakdown for short positions.
(The author is Chief Mentor, Indus School of Technical AnalysisFinancial Journalist, Technical Analyst, Trainer, Family Fund Manager)
