Nifty forms Shooting Star
image for illustrative purpose
The intensified profit booking and all-round selling pressure dominated the market at the weekend. NSE Nifty declined by another 71.15 points or 0.38 per cent and closed at 18,563.40 points. The PSU Bank index is the top loser with 1.21 per cent. All other indices declined by 0.10 per cent to 0.92 per cent. Only Infra and Realty indices closed flat to positive. The Market breadth is negative as the Advance-Decline ratio is at 0.86. About 85 stocks hit a new 52-week high on Friday, and 65 stocks traded in the upper circuit. Kotak Bank, HAL, and IEX were the top trading counters on Friday in terms of value. IndusInd Bank is the top gainer in the Nifty, and HeroMotoCorp and HDFC Life were the top losers.
Nifty has formed a Shooting Star candle, which has very strong bearish implications. For the second consecutive day, the index closed below the previous day’s low. It also closed below the 8EMA, which acted as short-term support. The Market breadth is again negative as the declines were outnumbered. And almost all the sectoral indices closed negatively. This gives clues about the weakness in the market. The Nifty closed at the day’s low is another weaker signal. Next week’s move is very crucial for the trend.
The Nifty must move above 18,778 for a trend to continue on the upside. For a bearish confirmation, the Nifty must close below the 18,530-464 zone. The 20DMA is also at a similar level of 18,443. On several occasions, the bears failed to get the confirmations for bearish implications in the recent past. The recent 7-day base low is at 18,464pts. Unlike earlier, the base breakout rallied without any pullbacks. This time it failed the rally to continue and closed much below the breakout level. Only a decisive close below this will get the bearish confirmations. The MACD has given a fresh sell signal. The RSI is just on the 60-line. The negative divergence still persists in the RSI. For now, it is better to stay away from the long positions.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
