Nifty forms indecisive Doji

After a crucial technical support level was tested, the benchmark indices gained and closed in the positive territory. The Nifty closed at 17266.75 with a gain of 53.15 points or 0.31 per cent. The market recovered with the help of heavyweight index stocks, but the market breadth is extremely negative. The PSU Bank and Metal indices are up by 0.82 per cent and 0.80 per cent, respectively.

The Nifty Pharma index is also up by 0.47 per cent. The Energy and Media indices are down by over one per cent. The Small-cap index is down by 1.72 per cent. India VIX declined by 3.68 per cent. The market breadth is extremely negative, as 1484 declines and 572 advances. About 55 stocks hit a new 52-week high, and 160 stocks traded in the lower circuit. AWL, Tata Power and Tata Steel were the top traded counters.

The benchmark index finally closed in the green on high swing movements and formed a Hammer candle. The long lower wick suggests that the buying interest has emerged at the lower levels. As we discussed on Monday, the target of 17041 has been met. This strong support may hold for some time as the index has recovered over 220 points from the day's low. At one point in time, all the sectoral indices traded in the negative zone. Once again, the Metal and PSU Banks led the recovery.

The Nifty exactly took support at 78.6 per cent retracement level of the pre-budget level. Though the index has formed a lower low and lower high candle, it formed an indecisive Doji. Wednesday's opening is crucial for a trend. A Negative opening and sustain for an hour will continue the trend on the downside. But, a positive opening and a move above the 17307 is a sign of short-term bounce.

As stated yesterday, the Nifty has met both targets on the downside and upside, and the bounce has given a short-selling opportunity in the opening session. On a very lower time frame (5-minutes), the Nifty has formed an inverted Head and Shoulders pattern. This is nothing, but a very short-term bounce or reversal. This bounce may face resistance at the 17420-446 zone. Before this zone, 17371 (EMA) also acts as resistance. Avoid short positions for at least the first hour on Wednesday. We may get the clues for the clear trend direction.

(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)