Range-bound trading in waning momentum
Nifty formed a long-legged Doji candle on a daily chart; A Doji candle at a lifetime is a sign of caution; The position sizing is very important trading strategy for now
image for illustrative purpose
The equity benchmark indices continue to move higher with a low volume. NSE Nifty closed with 27.20 points of 0.12 per cent gain and closed at 22,405.60 points. The Nifty PSE, and CPSE were the top gainers with 2.38 per cent and 2.25 per cent, respectively. The Energy index is up by 1.79 per cent. The Media and IT indices were the top losers with 1.85 per cent, and 0.77 per cent, respectively. All other indices were closed with less than half per cent gains and insigificant declines. The India VIX is flat at 14.92. The market breadth is negative as 1,704 declines and 898 advances. About 379 stocks hit a new 52-week high, and 118 stocks traded in the lower circuit. BHEL, HDFC Bank, SAIL, and Reliance were the top trading counters on Monday, in terms of value.
Nifty closed at another new lifetime high and closed above 22,400 points. The volumes were lower in three days. It closed below the open in the first and the last hour with high volume. The index traded within the first hour’s range. It has formed a long-legged Doji candle on a daily chart. This range-bound trading with waning momentum indicates a lack of interest in making fresh purchases. As the index formed a new all-time high, there was no weakness. A Doji candle at a lifetime is a sign of caution.
Monday’s range of 22,358-440 is crucial for a directional bias in these conditions. Either side breakout will give a clue for market direction. Generally, a Doji candle at lifetime required a negative close for a reversal signal. If the index closes below Monday’s low, it will provide a confirmation for a retracement towards 20DMA of 22,032 points. Last Friday’s high or close 22,353-338 is the immediate support. The short-term support, 8EMA, is at 22,227 points. As confluence supports zone 22,023-358, is critical now. On the upside, continue as long as these supports are protected. The targets are open to 22,700 points. The position sizing is very important trading strategy for now.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
