Nifty forms Hanging Man candle, signals trend exhaustion
Caution for bulls as charts form bearish candles; The current impulsive swing may attract profit booking; On indicators front, RSI declined from extremely overbought zone to 77.38, Hourly MACD has given a fresh sell signal
image for illustrative purpose
The domestic equity benchmark indices rallied for the sixth straight session, forming another all-time high. NSE Nifty gained by 66.45 points or 0.34 per cent and closed at 19,389pts. The Nifty IT is the top gainer with 1.04 per cent. The FinNifty gained by 0.79 per cent. The Oil & Gas and Auto indices were the top losers, with 0.68 per cent and 0.48 per cent, respectively. The advance-decline ratio is at 0.86, as more declines than advances. About 124 stocks hit a new 52-week, and 75 stocks traded in the upper circuit. HDFC Bank, Bajaj Finance, HDFC, and SBI were the top trading counters on Tuesday in terms of value. On Tuesday, 66 build deals and 35 block deals have happened.
The bulls continued to rampage for the sixth day. This unique rally, with all gap-ups, continued to be out of the Bollinger bands. Finally, the Nifty has formed a Hanging Man candle and indicates exhaustion of the trend. The index closed below the open, and breadth has not improved. Generally, the minor swings do not sustain more than 6-8 days. As the current swing is impulsive in nature, it may attract profit booking. On Tuesday, on a positive close, the broader market breadth turned negative as the declines outnumbered by 992 stocks. In the F&O segment, about 100 out of 189 stocks have witnessed a short buildup. On Tuesday, the BajajFin twins, TCS and Infosys have led the rally with 59.37 points contribution in 66.45 points gain.
On the indicators front, the hourly RSI declined from the extremely overbought zone (above 80) to 77.38. The Hourly MACD, too, has given a fresh sell signal. Importantly, the Nifty traded mostly in the first hour’s range. The other important development on Tuesday is the Bank Nifty and FinNifty closed strongly, but formed bearish candles. The Bank Nifty closed below the open and formed a long-legged Doji candle. The FinNifty has formed a big shooting star candle. The heavy-weight BFSI and FMCG indexes are also in an exhaustion pattern. The broader market indices Nifty Total Market Index and the Nifty-500, also formed a bearish candle. With the majority of sectoral and thematic indices formed bearish candles, it may be a caution of the bulls. Unless Nifty sustains above Tuesday’s high of 19,434.15pts for at least one hour, it is better to avoid fresh long positions. For shorting opportunities, wait for an hourly close below 19,345pts. Expect wild moves with increased volatility.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
