Nifty forms long-legged small body candle
The candle resembles the August second week's bearish candle
image for illustrative purpose
The benchmark indices closed negative for the second consecutive day. NSE Nifty ended with 126.35 points or 0.70 points lower, closing at 17877.40. The Auto and Energy indices are up by 0.71 per cent and 0.78 per cent, respectively. The Metal and Infra indices also closed positively. The IT and Pharma indices declined by 1.43 per cent and 1.29 per cent. Bank Nifty is declined by 0.47 per cent and Fin Nifty down by 0.48 per cent. The broader market and Nifty breadth are negative. 1094 stocks closed negative, and 803 stocks were positively closed. About 129 stocks hit a new 52-week high, and 92 stocks traded in the upper circuit.
The Nifty has declined from the opening highs. For the last three days, the efforts to cross 18100 have failed. Though the price is above the 18000 level, the 20DMA has turned down, which is negative. On a weekly chart, the Nifty has formed a long-legged small body candle. The candle resembles the August second week's bearish candle. The index gained 79 points over the last five days, but the price moments are broadly indecisive.
The indecisiveness at the swing is not a good sign. Wednesday's recovery of over 230 points from the low has almost been erased. The index has formed a dark cloud cover candle which is negative for the index. It is holding the 8EMA support for the day. The MACD line is moving flat for the last three days. The negative divergence in RSI is clearly visible now as the index is struggling to move higher. On the hourly chart, the index failed close above the previous bar's high on an hourly chart, which is also a negative factor.
The broader market and the index breadth are negative. The last two days of decline with higher volume indicate that the distribution is taking place. In any case, if the index closes below 17778, it registers failed breakout. And it also forms a serious bearish candle on a weekly chart. It is better to avoid aggressive positions. Wait for a bearish confirmation; otherwise, be on the sidelines for the week.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
