Avoid fresh long positions
Nifty forms Shooting Star Doji candle, an indication of tiredness in the trend and not a good sign for the current upside move
image for illustrative purpose
After six days of rally, the benchmark indices showed tiredness. NSE Nifty just flat to positive by gaining 24.90 points or 0.14 per cent, and closed at 17,624.05 points. The Realty index is the top gainer with 4.29 per cent. Nifty Auto Energy gained over one per cent. The Bank Nifty and FinNifty are down by 0.50 per cent and 0.39 per cent, respectively. FMCG is also down by 0.43 per cent. All other indices gained 0.20 per cent to 0.96 per cent. As we expected, the India VIX gained by 4.03 per cent and closed at 12.27. The advance-decline ratio is positive at 1.13. About 59 stocks hit a new 52-week high, and 175 stocks traded in the upper circuit. ICICI Bank, HDFC Bank, and Tata Motors were the top trading counters in terms of value.
The Nifty opened higher and met our target of 17,700 points. It did not sustain at the higher levels with renewed profit booking at higher levels, as we expected. The Nifty has formed a Shooting Star candle just above the sloping channel resistance line. As suspected last week, the index is clearly showing exhaustion. The Shooting Star Doji candle is an indication of tiredness in the trend. In any case, the index opens negative on Tuesday and closing below 17,600 will indicates the reversal. A Shooting Star candle at is not a good sign for the current upside move. The Nifty also closed below the opening level and near the day's low. Volumes were recorded as highest in the last four days, indicating profit booking and distribution. The heavy-weight sectors like Bank Nifty, Financials, and FMCG closed negatively today. Currently, the Nifty is trading above all key moving averages, and all the indicators are showing bullishness. But, today's fall is led by index-heavy weight sectors, banking and financial stocks. The Bank Nifty has formed a bearish engulfing pattern, and the FinNifty formed a dark cloud cover. For existing long positions, today's low 17597 is a crucial support. It is better to avoid fresh long positions.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
