Nifty Signals Bullish Momentum Despite Fall

If the index fills the gap by declining below 23956, it will be in negative zone. On the upside, the 38.2% retracement level of the prior fall is at 24414, and the prior swing is 24538, which will act as a resistance zone

The indices failed to continue the last two-day’s momentum and closed negative. The Nifty is down by 27.40 points or 0.11 per cent and closed at 24194.50. The Nifty IT is the top gainer with 1.07 per cent. The FMCG, and Media indices gained by over 0.80 per cent. The microcap, and small cap indices also gained by over 0.80 per cent. The auto index is the top loser with 1.28 per cent. The pharma, CPSE, energy, infra, oil and gas, and healthcare indices declined by over 0.50 per cent. The India VIX remained flat at 15.30. The market breadth is positive as 1635 stocks advanced and 1165 declined. As many as 76 stocks hit a new 52-week high, and 127 stocks traded in the upper circuit. Triveni Turbine, HDFC Bank, BSE, Adani Enterprises, and Mazdock are the top trading counters in terms of value.

The Nifty has formed an open high candle and an engulfing candle. It failed to continue the strong bullish momentum for the third day. The volumes were much lower, almost 25 per cent of the previous day’s volume. The index has formed a lower low and lower high candle. For now, Monday’s gap area is crucial to protect the positive bias. If the index fills the gap by declining below 23956, the markets will be in negative zone. If the index forms a lower high and bounces, it will form a consolidation pattern like a double bottom. There is no danger of a fresh bearish strength as long as it holds the 23367, which is a 50-week average, and last week’s low of 23263. Currently, the index is above the 20DMA and 8EMA. The RSI is flat, in 50 zone. The MACD shows a further increase in the bullish momentum. The index breadth is a worry as the declines were outnumbered. On the upside, the 38.2 per cent retracement level of the prior fall is at 24414, and the prior swing is 24538, which will act as a resistance zone. Only above this will the index give a reversal signal. The selling volume is higher than the buyer’s demand, though the overall volume is much less than the previous day. As the monthly derivative expiry nears, the rollovers and short-covering trades will influence the trend. For now, stay cautiously positive above the gap area.

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