The Nifty breaks the double top pattern

The indices have recovered most of the losses as the short-covering on the weekend. Even though there is no de-escalation in the geopolitical situation, most of the global indices also recovered from the lows. The Nifty went up by 410.45 points and closed at 16,658.40. Metals and Realty indices gained by over 5.5 per cent. Midcap-100 and Smallcap-100 indices advanced by 4.84 per cent and 4.18 per cent, respectively. All other sector indices gained by over 2-4 per cent. The VIX is down by 16.39 per cent. Market breadth is positive as 1,755 advances and 313 declines were recorded. About 25 stocks hit a new 52-week low, and 173 stocks traded in the upper circuit.

The benchmarks opened with a positive gap and later traded mostly in the sideways. The Nifty formed a higher high and higher low candle, but it has formed a strong bearish candle on the weekly chart. It closed much below the 200DMA. The previous day's gap is yet to be filled. The Nifty gained over 2.5 per cent, but the momentum did not improve. In fact, the daily histogram has increased on the negative side. The technical structure of the market disturbed a lot as the benchmarks declined below the several long-term supports.

The Nifty has broken down the double top pattern with strong distribution and formed two lower lows and lower highs on a weekly chart. Weekly RSI broke the Head And Shoulders pattern and closed below the June 2020 level. The weekend pullback is just a short cover as the open interest has not increased much. A close above 16711 is positive, and it can test the breakdown level and a prior support zone of 16,800-832. Currently, the 200DMA is placed at 16,903. The market may face stronger resistance at these levels. On the downside, the prior bar low is the immediate support. Thursday's low of 16,203 may hold for some period unless a very serious war erupts or any further escalation of the geopolitical tension to other countries.