Nifty forms Hammer candle
After 8 days, benchmark index closed below opening level, failed to move above the first hour’s high, and it also filled the opening gap; The Volumes were lower than the previous day; For 3rd consecutive day, the index closed above the Bollinger bands
image for illustrative purpose
Market breadth is positive
- VIX up by 2.10%
- 1,301 advances
- 1,185 declines
- 217 stocks hit a new 52-week high
- 129 stocks traded in the upper circuit
- MACD at a new high
The equity benchmark indices were relentlessly rallying to new highs. Nifty gained by 82.60 points or 0.40 per cent and closed at 20,937.70 points. The Nifty Media index is the top gainer with 2.11 per cent. The IT and FMCG gained by 1.67 per cent and 1.55 per cent, respectively. The Bank Nifty, FinNifty, Auto, and Realty indices were down by less than half a per cent. All other sectoral indices gained by 0.1 per cent to one per cent. The India VIX is up by 2.10 per cent to 13.74. The market breadth is positive as 1,301 advances and 1,185 declines. About 217 stocks hit a new 52-week high, and 129 stocks traded in the upper circuit. Six stocks from Adani Group are in the top trading counters in terms of value.
After eight days, the Nifty closed below the opening level. It formed another Hammer candle. Importantly, it failed to move above the first hour’s high, and it also filled the opening gap. The Volumes were lower than the previous day. For the third consecutive day, the index closed above the Bollinger bands. It is now 5.21 per cent above the 20DMA, which is too far away from the mean level. The RSI (84.03) is at an extreme level in recent history. The MACD line is also at a new high. The basic principle of technical analysis is that any verticle rise will not be sustained for longer. It must enter into the counter-trend and come into the Bollinger bands.
The last six days of the move are nothing but a straight-line fashioned and near 90-degree trend. If the index closes negative on Thursday, the Nifty will test at least 20460. Before the resumption of an uptrend, a healthy correction is inevitable. The domestic market is not only overstretched, it is also overvalued. The PSUs and some of the mid and small-cap stocks were in an extremely overbought zone. The Put-Call Ratio (PCR) is at 1.50, showing the extreme level. The derivative data suggest that the 20500 is a support area, and it is very difficult to sustain above 21000. In these conditions, stay vigilant and be with utmost caution. Keep taking partial profits.
[Chief Mentor, Indus School of Technical Analysis Financial Journalist, Technical Analyst, Trainer, Family Fund Manager]
