Nifty forms Hanging Man
Nifty reached first target of 17,758 pts; From now, upside potential is limited to another 200 pts; Index doesn’t show any weakness in the trend, but tiredness is clearly visible
image for illustrative purpose
NSE Nifty on Tuesday rallied for the seventh successive day and closed near the previous minor high. The Nifty gained by 98.25 points or 0.56 per cent. Only the Nifty IT index is a loser today by 1.26 per cent. The Nifty Metal index is the top gainer with 1.76 per cent. The Bank Nifty and FinNifty gained by 1.30 per cent and 1.08 per cent, respectively. The Nifty Energy and Auto indices also gained by a per cent. The market breadth is positive as the Advance-Decline ratio is at 1.76. About 47 stocks hit a new 52-week high, and 142 stocks traded in the upper circuit. HDFC Bank, ICICI Bank, and Axis Bank were the top trading counters today in terms of value.
The Nifty negated the previous day's Shooting Star’s bearish implications by closing above its high. But it again formed a Hanging Man candle. As we projected, the Nifty has reached the first target of 17,758 points. From now, the upside potential is limited to another 200 points. In the last seven days, the Nifty rallied almost 800 points or 4.7 per cent. Currently, the index does not show any weakness in the trend, but tiredness is clearly visible. A spike in the volume shows fresh buying interest. But the decline in Open Interest is showing unwinding. Except for IT, all the sector indices gained and participated in the upside move. Interestingly, the 50 DMA is still in the downtrend, and the VIX is declined by another 2.42 per cent to 11.97.
This low VIX is dangerous for the current rally. During the downtrend, counter-trend rallies are common, and any profit booking will lead to a sharp decline. The prior swing and the Anchored VWAP resistances are at the same zone of 17781-800. This zone may act as an immediate hurdle. Above this zone, the index can test 18000-18134. Only in case of a move below the previous day's low will be negative. As the index can’t move in one direction for more than 7-8 days, it is better to stay cautious about the long positions. Avoid long positions now and wait for the right opportunity to trade. Keep trailing stop losses in place.
(The author is a Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
