Nifty Forms Outside Bar, Gives Bearish Signal
Avoid index trading until directional cues emerge; If the index fails to move above 25212, expect that the counter-trend consolidation has ended its upside move. It is also important to protect 25008 to keep the momentum intact on the upside
Nifty Forms Outside Bar, Gives Bearish Signal
The decline in heavyweight stocks dragged the market on Tuesday. NSE Nifty declined by 70.60 points or 0.28 per cent and closed at 25,057.35. The Metal index was the top loser with 1.44 per cent. The Auto, Energy Pharma indices declined over half a per cent. The Realty index was the top gainer with 2.05 per cent. The Smallcap-100 index was up by 1.11 per cent. The Media index was up by 0.62 per cent. The India VIX is flat at 13. The market breadth is neutral as 1382 advances and 1389 declines. About 106 stocks hit a new 52-week high, and 114 stocks traded in the upper circuit. Angel One, Reliance, Mazdock, and BSE were the top trading counters in terms of value.
Over a two per cent fall in heavy-weight stock, Reliance dragged the benchmark index below the 50DMA. The stock has contributed over 54 points in the fall. The Nifty opened with a positive gap above the previous day’s high. However, soon after the opening, heavy stocks witnessed the selling pressure. The index declined below the prior day’s low and formed an outside bar. The Nifty has added a distribution day with a decline in volume that is higher than the previous day. It closed just below the 50DMA. It also closed below the 23.6 per cent retracement level. If the index fails to move above Tuesday’s high of 25,212, expect that the counter-trend consolidation has ended its upside move. It is also important to protect Tuesday’s low of 25,008 to keep the momentum intact on the upside. The index took the support of the rising channel’s support line. The current consolidation formed a pennant pattern. A close below 25,000 will result in the breakdown of the pattern, which is bearish. In any case, a decline below last Monday’s low of 24,694 will resume the downtrend. On the upside, it must close above 25,300 for a consolidation to continue. Avoid trading in the index until a directional cue arrive.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
