Nifty forms Long-legged Doji
On 15 min time frame, the lower highs and lowers lows were formed even though volatility is higher; the weekly histogram shows a steep increase in bearish momentum
image for illustrative purpose
The benchmark indices declined further on a gap down opening. The Nifty declined by 218 points or 1.27 per cent and settled at 16953.95. Because of HDFC Bank and ICICI Bank's positive closing, the Bank Nifty closed with a 0.10 per cent gain. All other indices ended in the negative zone. The Nifty IT, Pharma, Metal, Infra, Media, Energy indices closed lower by over two per cent.
The Realty index declined by 3.76 per cent. The Volatility index rose by 15.83 per cent. Overall, market breadth is extremely negative as 1650 declines and 459 advances. About 59 stocks hit a new 52 weeks high and 144 stocks traded in the lower circuit. ICICI Bank, Reliance and Adani Wilmer were the top trading counters today.
The Nifty has tested the 17893 level, which is a 50 per cent retracement level of the prior uptrend, as stated yesterday. The gap down opening was also a reality. Now, the behaviour here is important from tomorrow, as the index has formed a Hammer kind of candle; as long as today's low 16888 is protected, it will consolidate. Now the 50DMA (17123) will act as resistance.
The index is now 0.81 per cent below the 50DMA and 2.68 per cent below the 20DMA. This is the third consecutive week of the gap down openings. It shows the strength of the bears. The lower time frame charts show higher volatility within the range. Long-legged Doji candles formed on 75 minutes charts in the afternoon session.
On a much lower time frame, 15 minutes time frame, the lower highs and lowers lows were formed even though volatility is higher. But failed to close above the opening level or fill the opening gap. The daily MACD declined below the zero line. The weekly histogram shows a steep increase in bearish momentum. It closed below the Anchored VWAP support and 1.81 per cent below the 20week moving averages.
The 65 points from the day's low at the end of the session are just because of the recovery in the Banking sector. Just before the expiry, the derivative volume and open interest increased, showing fresh shorts were built up. The Rollovers are at 36.95 per cent, lower than the previous month. Today's high 17000-50 zone will is the immediate resistance. And a move below the low of the day 16888 will resume the fall. The volatility will further increase. Use the most prudent risk management.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
