Nifty forms Hammer candle
It’s normally bullish if the next day's candle forms a higher low and closes positively
image for illustrative purpose
The equity market traded with increased volatility. The benchmark index Nifty smartly recovered and closed almost flat. It closed at 19,385.30 points with 35.15 points or 0.19 per cent decline. The Nifty IT, Metal, and Energy indices closed positively with less than 0.20 per cent. The Nifty Realty index is the top loser with 1.21 per cent. The Media, Auto, and FMCG indices were down by 0.62 - 0.81 per cent. The other sectoral indices are down by less than 0.5 per cent.
The market breadth is negative as 1,127 declines and 794 advances. About 54 stocks hit a new 52-week high, and 65 stocks traded in the upper circuit. Adani Enterprises, Infosys, and Axis Bank were the top trading counters on Tuesday in terms of value. The Nifty recovered over 200 points from the day's low.
The recovery in three heavy-weight stocks, Reliance, TCS and ICICI Bank, led the recovery. Still, it is a negative day and formed a lower high and lower low. The market breadth and index breadth were negative. Volume was higher, and the index just escaped a distribution day, as it fell less than 0.25 per cent. During the day, The Nifty broke the crucial support of 18244. It also broke the 10-week average of 18249 and finally closed above the average.
Today's Hammer candle formed after a decline of 3.62 per cent. The Hammer is normally bullish if the next day's candle forms a higher low and closes positively. For this reason, today's low of 18202 will act as crucial support. Only a move below this level will become more bearish. Broadly, the 18202-18440 zone is very crucial for a directional trend. Either side move will lead to sharp movement. As we expected, the volatility has increased and will further increase in the coming days.
The Nifty is still below the moving average ribbon on the daily and hourly chart. The MACD line is declining. The RSI closed below the 50 zone. The negative directional indicator, -DMI, is dominating and sustaining above the +DMI and ADX. The Elder impulse system has formed another neutral bar. The KST is in a bearish set-up. We need more confirmation on the recovery rally. Unless there is a volume spurt and broader participation of stocks and sectors, we cannot be sure of a reversal. Watch the 18440 for bullish confirmation.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
