RRG chart signals weakening quadrant for Nifty

The domestic market has declined after a positive start. The profit booking and fresh shorts were built up in the market. NSE Nifty closed at 18,157.00 with 45.80 points or a 0.25 per cent decline. Bank Nifty and the FMCG indices are up by 0.25 per cent each. All the other sectoral indices declined on Wednesday. The Nifty Pharma, Realty, and PSE indices declined by over one per cent. All other sector indices registered modest losses. The market breadth is negative as 1,059 declines and 846 advances. 99 stocks hit a new 52-week high, and 113 stocks traded in the upper circuit.

Adani Ports, Adani Enterprises and Reliance were the top trading counter on Wednesday in terms of value. Benchmark indices opened with a positive tone, but failed to stay at higher levels. It continuously declined to the below 18,150 level. The Nifty has formed an engulfing candle after the Dragonfly Doji candle.

These consecutive indecisive and bearish candles are not giving the confidence to go long at the current levels. The 5EMA acted as support again. The index is currently 3.36 per cent above the 50DMA and 2.86 per cent above the 20DMA. The negative divergences are still intact in all major indicators. The momentum is clearly on the downside. The RSI has developed another negative divergence in the last six days.

The indicator has formed parallel tops, but the price made the higher tops. The Elder impulse system has formed five successive neutral bars as the index is not moving decisively on either side. The RRG Momentum has declined below the 100 zone. This means the index entered into a weakening quadrant on an RRG chart. Even the Relative Strength is declining. On a declining day, the Open Interest has increased, which is an indication of shorts building up. The Index breadth is also negative as 35 stocks of Nifty-50 declined on Wednesday.

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