Nifty forms lower high, lower low candles
Normally, Monday’s candle is most bearish in nature, as the open is high and low is the day's low
image for illustrative purpose
The domestic benchmark indices ended on a positive note. NSE Nifty closed with 132.80 points or 0.85 per cent. All the sector indices closed with gains. The Nifty IT is the top gainer with 2.05 per cent, followed by the Smallcap-100 index with 2.04 per cent. Metal, India, and Midcap-100 indices closed higher by over one per cent.
The remaining sectors indices were up by less than a per cent. The VIX is up by 2.21 per cent. The market breadth is positive as 1562 advances and 532 declines. About 26 stocks hit a new 52-week low, and 179 stocks traded in the lower circuit. Reliance, Maruti and PayTM were Monday's top trading counters in value terms.
The equity markets opened higher and closed at the low. As we expected, the opening high was not sustained. The Nifty has formed lower high and lower low candles on a lower time frame. Normally, Monday's candle is most bearish in nature, as the open is high and low is the day's low.
The only positive thing is that the benchmark index closed above the 38.2 per cent retracement level of the prior downswing. Now the 50 per cent retracement level and the 20DMA are at the same level at 15984-988. The Nifty declined over 95 points from the opening high.
On an hourly chart, the momentum has clearly waned. As stated earlier, Monday's high will act as a crucial resistance. In any case, if the Nifty fails to close positively on Tuesday, it will be difficult to move further high. Monday's high 15927 and 20DMA 15984 is a strong zone of resistance.
The RSI is closed at the sloping resistance line. It is still below the 50 zone. For a bullish strength, it has to cross above 55 zone. The MACD line has crossed the signal line as a huge gap and a positive close. As the Nifty tested the gap, let us wait and watch for a decisive directional signal. For an uptrend to continue, the Nifty must move above yesterday's high of 15927. A negative closed is a reversal sign.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
