Nifty forms Evening Star candle

The equities rallied for a sixth straight session on Metals and IT sectors support. The benchmark index Nifty is up by 82.65 points or 0.46 per cent and settled at 18147.65. The Nifty Metal and IT indices were up by 1.42 per cent and 1.14 per cent, respectively. The Energy also up by 1.42 per cent. The Pharma and FMCG were down by 0.19 per cent and 0.13 per cent, respectively. The Nifty 500 index is up by 0.53 per cent, and the Midcap-100 is gained by 0.97 per cent. All other sector indices advanced by 0.3 per cent to 0.9 per cent. The market breadth was positive as the advance-decline ratio is at 1.57. About 80 stocks hit a new 52-week high, and 86 stocks traded in the upper circuit. HDFC twins, ICICI Bank, and Reliance were the top trading counters today in terms of value.

The Nifty has opened with a positive gap, above the previous day's high. The index has rallied over 600 points in the last six days. It traded mostly traded within the first hour's range. It has formed a small body candle. In any case, the Nifty opens with a gap down, and closes negative will be a weaker sign, and today's candle becomes an evening star candle. Volumes were lower than the previous day. During the last hour, the index declined by over 50 points. Other than the first and last hours, the index traded in a tight range.

Many of the sector indices also traded in the first-hour range. The FinNifty closed near the day's range. Today's rally was supported by IT and Metals. The broader market also participates in the rally as the Nifty 500 is up by 0.53 per cent. On an hourly chart, for the first time in the last six days of the rally, it has formed a rectangle base with a parallel high. The RSI is declining from an extremely overbought condition. The daily RSI is also in an overbought condition.

Generally, the Evening Star candle gets confirmation for bearish implications only if the next candle opens with a gap down and closes negatively. The interesting development is that, on the market rally, the VIX is up by over 10 per cent at one point in time. Finally, it closed with an 8.68 per cent spurt and settled at 11.89. This is not a good sign. The Fed's decision will be crucial for the next 2 - 3 days. On the upside 18180-300 zone will be a crucial resistance zone. In any case, the Nifty decline below 18100 is an early sign of weakness. Stay cautiously optimistic for now.

(The Author is Chief Mentor, Indus School of Technical AnalysisFinancial Journalist, Technical Analyst, Trainer, Family Fund Manager)