Nifty forms dark cloud cover

The NSE Nifty opened at a new all-time high, crossed the 16,700 mark. However, it failed to hold its initial gains and declined almost 150 points from the day's high. At the end of the day, the Nifty closed at 16568.8 with a loss of 45.75 points. Like, Tuesday, the Nifty IT, Pharma and FMCG sector indices closed in the green. The Bank Nifty declined by 0.87 per cent. FinNifty, Metal and Private Bank indices closed by over 0.50 per cent. The market breadth is negative as 1,306 declines and 652 advances. About 87 stocks hit a new 52-week high, and 158 stocks traded in the lower circuit. After scaling new high, the Nifty did not sustain with profit booking at the higher levels. It formed a dark cloud cover candle, which is bearish. But as the Nifty formed a higher high and higher low candle. Even though the index declined only 45 points, the index breadth is negative and signalled that the market will enter into another round of consolidation. The Mid and Smallcap underperformance is another negative factor for the market at the current juncture. A majority of index stocks are looking tired at their highs. In any case, the Nifty closes below the 16,535 points, we see the retest of the 16,360 zone, which is the breakout level. The 20DMA support is at 16138. As we mentioned on Tuesday, the mean reversion may be a reality soon. Only in case of a decline below 16138 or 20DMA may give short term bearish signals. The negative divergences emerge once again on a lower time frame, which is an early caution for the bulls. The MACD has given a sell signal on a 75-minute chart. As the weekly expiry in place, the market may witness volatile moves. Try to be with a neutral strategy till it gives clear trend indications.

(The author is financial journalist, technical analyst, family fund

manager)