Range-bound trading for Nifty
Benchmark index forms Hanging Man candle and closed above 34EMA
image for illustrative purpose
The domestic benchmark indices traded positively with global markets support. NSE Nifty gained by 38.30 points or 0.22 per cent. The Nifty Auto and PSU Bank indices were the top gainers with 1.49 per cent and 1.06 per cent. FMCG and Metal indices were down by 0.36 per cent each, and the Nifty IT declined by 0.23 per cent. All other indices advanced by 0.42 per cent to 0.90 per cent. The market breadth was positive as the advance-decline ratio is at 3.28. About 58 stocks hit a new 52-week low, and 208 stocks traded in the upper circuit. HDFC Bank, ICICI Bank, and HDFC were the top trading counters today in terms of value.
The Nifty opened with a 68 point gap up, making it open as the day's high. It closed below the opening level. Even though a majority of sector indices and broader market participation in today's upside move, the volume is further declined. Today's price structure looks like a Hanging Man, which is bearish.
The index traded within the first hour’s range for the day. But it closed above the previous day's high, which is a positive sign. It also closed above the 34EMA. The Bank Nifty tested the sloping trend line resistance and the 10th March gap area. It also closed above the previous day's high and above the 50DMA. These two major indices closed positively, but the Nifty underperformed compared to the Bank Nifty. Both indices have formed Hanging Man candles. Let us wait and watch whether these patterns lead to exhaustion or not.
The deceleration in volume on a price rise is not a good sign. As mentioned earlier, the 50DMA and the channel resistances are crucial for an uptrend to continue. The Nifty also tested the 61.8 per cent retracement level (17428) of the prior downswing. This means the index has met the measured target of a counter-trend. The gap area resistance and the 78.6 per cent retracement levels are at the same level of 17592. During this truncated week, The Nifty may trade in a tight range for the next two trading sessions. Options sellers will rule the market this week.
(The author is a Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
