Nifty forms Dark Cloud Cover candle
The volumes were almost equal to the previous day; Benchmark index closed near the prior base support of 21,500 pts
image for illustrative purpose
What Charts Indicating?
- Nifty declined below 20DMA
- RSI declined to 51.45 again
- MACD line is still declining
- On an hourly chart, the index has taken a support at moving average ribbon
- Hourly MACD gave a fresh sell signal
The benchmark indices erased most of the previous day’s gains as the profit booking was seen. NSE Nifty declined by 21.5.50 points or 0.99 per cent and closed at 21,522.10 points. The PSU Bank index is the top gainer with 0.96 per cent. The Metal, Media, and Realty indices gained by less than 0.50 per cent. The Energy index is the top loser, with 1.69 per cent. The Infra and FMCG declined by over a percentage point. All other sector indices were down by 0.10 per cent to one per cent. The India VIX is up by 2.69 per cent. The Market breadth is neutral as 1,275 advances and 1,267 declines. About 282 stocks hit a new 52-week high, and 150 stocks traded in the upper circuit. HDFC Bank, Bajaj Finance, and NHPC were the top trading counters on Tuesday in terms of value.
The equities traded nervous as the budget is looming nearer. The profit booking in Monday’s rally was seen in many stocks, including Reliance Industries. The Nifty has erased most of the previous day’s gains and formed a Dark Cloud Cover candle, which is negative. The volumes were almost equal to the previous day. It closed near the prior base support of 21,500 points. Importantly, the index declined below the 20DMA just a day later. The RSI declined to 51.45 again and formed another lower high. The MACD line is still declining. On an hourly chart, the index has taken a support at moving average ribbon for the day. But an hourly MACD has given a fresh sell signal. If the Nifty fails to move above today’s high of 21,813 points, we can assume it is the short-term swing high. Only a decisive close above 21,813 points with high volume the index can form a new high. But in any case, if it declines below 21,429 points, it can resume the downward move. Expect high tension volatility as the event and the weekly derivatives expiry are on the same day. For the Thursday expiry, the Implied Volatility is at its highest level of 22.3. This is why the Straddle premiums are expensive at Rs285, just two days before. So, expect more up and down days, with high volatility, in the near term.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
