Nifty Forms Bearish Engulfing Candle

The indices failed to sustain gains. NSE Nifty declined by 723.30 points or 0.33 per cent. Only Bank Nifty CPSE, were able close with less than 0.45 per cent gains. The Realty, Media down by 1.83 per cent, and 1.50 per cent, respectively. The Auto index is declined by 1.10 per cent. The Small-cap, Micro-cap, Metal, Mid-cap, Consumer Durable, Infra, IT and Commodities indices were down by over half a per cent. The India VIX is declined by 3.01 per cent to 13.28. The market breadth is negative as 1,894 declines, and 984 advances. About 268 stocks hit a new 52-week low, and 133 stocks traded in the lower circuit. Data Patterns, IndusInd bank, BSE, Bharti Airtel and HDFC Bank were the top trading counters in terms of value.

The Nifty formed an inside bar, and a bearish Engulfing candle. As the long weekend approaches, the volumes were shrunk. It closed below the 8EMA decisively. Even though the index traded within the range for the past six days, session’s price action is showing high probability of breaking on the downside. The Index closed at the lowest level of the day. The RSI is back to bearish zone, as it failed to sustain in the neutral zone. The Nifty traded in just 363 points range in the last four sessions. It formed a small body, a small shadow candle. The index struggled to move above the 20DMA and the last six days’ high. On an hourly chart, the index closed below the moving average ribbon, and the MACD is below the zero line, which is short-term negative.

Now, for an upside move, the index must close above the 20DMA, which is at 22,586 points. In any case, it closes below 22,314 decisively with a distribution day, will be a brutal fall. It may breach the previous low of 21,964.

The Global events, and the news about the recession in the USA, may impact the sentiment further. Stay vigilant for on positional bets.

(The author is partner, Wealocity Analytics, Sebi-registered research analyst, chief mentor, Indus School of Technical Analysis, financial journalist, technical analyst and trainer)