Nifty forms lower low and lower high candle
A negative close or a move below Monday's low of 18244, bears will regain the command over market direction
image for illustrative purpose
NSE Nifty ended its two-day fall and closed near the previous day's high. The benchmark index gained 151.45 points or 0.83 per cent and closed at 18420.45. The Nifty and PSU Bank indices declined by 0.51 per cent and 0.12 per cent, respectively. The Nifty Auto index is the top gainer with 1.59 per cent. The FMCG, Metal, Energy and Infra indices gained over a percentage. The other sectoral indices gained by less than a percentage points. The market breadth is positive as 1152 advances and 790 declines. About 58 stocks hit a new 52-week high, and 91 stocks traded in the upper circuit. Infosys, Reliance and HDFC Bank were the top trading counters today in terms of value.
The Nifty recovered and erased the previous day's loss. It retraced 38.2 per cent of the last three days' price action. But, the index is still below the previous day's high; in fact, it formed a lower low and lower high candle. The smart recovery did not attract the volume. Even the Open Interest also declined by 1.05 per cent. This low volume recovery is because of short-covering. There is no major technical development that occurred today, as it was inside the bar and still below the short-term average of 5 and EMAs.
Currently, it is 0.65 per cent below the 20DMA. As mentioned earlier, the Nifty has to close above the prior resistance of 18442 and close above the 20DMA of 18541 to end the bearish bias. There is now a change in the MACD histogram shows the upside momentum not yet gained. The RSI bounced above the 50 zone. On an hourly chart, the index just closed at the moving average ribbon. For now, today's low of 18244 will act as crucial support. A negative close or a move below this level, the bears will regain the command of market direction. At the same time, we need to watch the index behaviour carefully in the 18442-541 zone of resistance. Above this zone, the market will test the previous high. As the VIX is at the lowest level, it is better to have prudent risk management in place.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
