Nifty forms parallel bottoms and a Doji candle

The equity markets opened on a positive note on the opening day of the fresh week. With an improved market breadth, NSE Nifty gained by 60.15 points or 0.38 per cent and closed at 15842.30. The Realty and Auto indices were the top gainers with 2.61 per cent and 2.27 per cent, respectively.

The Bank Nifty and Fin Nifty gained by 1.5 per cent. Only the defensive sectors IT, Pharma, and FMCG indices declined by half a per cent on average. The Volatility Index VIX is up by 4.44 per cent. The broader market breadth is positive as 1406 advances and 689 declines. About 75 stocks hit a new 52-week low, and 200 stocks traded in the upper circuit. Ambuja Cements, Reliance and the SBI were the top trading counters on Monday.

The Nifty has formed parallel bottoms and a Doji candle. This southern Doji candle does not have any trend change implications unless it gets a confirmation. After a volatile session, the index closed in positive territory. Monday's move cannot be considered a pullback effort as it has not moved above the prior day's high. In fact, it declines just below the previous day.

The indecisiveness about the direction needs clear confirmation. Tuesday's close will decide whether the market will reverse from here or resume the downtrend after the last two days of consolidation. A positive close gives more chances for a reversal to the upside, but a negative close or a close below the 15735 will resume the downtrend.

The momentum is flat, even on the hourly chart. Only a close above the prior day's high will give a clear signal of the reversal of a trend. In such a case, the Nifty will test near 16300 levels.

Previously, the Doji candle on March 7 got a confirmation in the form of bullish engulfing and reversed the trend. Let us wait for a similar confirmation of a bullish close on Tuesday for a reversal of a trend. In case it fails to close positive territory and closes below the three days, it will resume the downtrend. The LIC listing may have a larger impact on the markets. The biggest IPO listing will be definitely a big sentiment factor for the market.

(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)