Nifty slips to form a shooting star candle

The weakness in global markets influenced the domestic equity market. The Nifty declined by 234.40 points or 1.03 per cent and closed at 22519.40. All the sectoral and thematic indices closed losses. The Pharma index was the top loser, with 1.72. per cent. The PSU Bank, Oil and Gas, Media, and FMCG indices declined 1.09 per cent to 1.26 per cent. All other indices declined by. 0.34 per cent to 0.97 per cent. The volatility index, India VIX is up by 3.83 per cent to 11.53. The market breadth is negative as 1670 declines and 957 advances. About 138 stocks hit a new 52-week high, and 80 stocks traded in the lower circuit. Bharti Hexa, HDFC Bank, Reliance, and Axis Bank are the top trading counters on Friday in terms of value.

The Nifty has formed a shooting star candle on a weekly chart, at a lifetime high. In a truncated week, it closed at the lowest level. It also closed below the prior two-day low. Friday’s 1.03 per cent decline with higher volume than the previous day and above-average are the big worry again. With this, a fresh distribution day was registered. It closed below the 5EMA and 8EMA. It also closed below the 23.6 per cent retracement level of the prior swing. Most importantly, the index closed below the prior swing of 22526. After a series of bullish bars, the Elder impulse system has formed a neutral bar as the momentum is on the downside. There are more significant alerts on the hourly chart. The index closed below the moving average ribbon. The hourly RSI and MACD closed on the bearish border lines. The daily RSI has also declined below 60. The negative divergence in the RSI in all time frames still exists. Nifty declined by 271.95 points or 1.19 per cent from Wednesday’s all-time high. A close below the prior week’s low gives confirmation for pattern implications. Though the index shows exhaustion signs several times, it has not given any confirmation for bearish bias. Wait for a close below the current week’s low by the next weekly closing. The important support is at a 38.2 per cent retracement level of 22368. Below this, the 20DMA is at 22270. For an upside, a close above Friday’s high, 22726, will resume the upside move. For now, stay cautious and book profits. The earnings season has begun, and we will see stock-specific activity from now.

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