The Nifty which started with a small gap on the higher side in morning trade on Thursday failed to garnet momentum as bears took control of D-Street in the first 15-minutes of trade. The index witnessed strong selling pressure throughout the session which made a ‘Bearish Belt Hold’ kind of pattern on the daily candlestick charts.
A ‘Bearish Belt Hold’ pattern is formed when the opening price becomes the highest point of the trading day (intraday high) and the index declines throughout the trading day making up for the large body. The candle will either have a small or no upper shadow and small lower shadow.
In Thursday’s price action, Nifty50 opened at 10,775.60 and rose marginally to 10,777.25 which made a small or non-existent upper shadow. The bears took control of D-Street in morning trade and pushed the index below its crucial support placed at 5-double exponential moving average (DEMA) placed at 10,737, and 13-DEMA at 10,712.
The index bounced back from its 20-DEMA placed at 10,670 to close 58 points lower at 10,682.70. The positive takeaway is that it managed to close above its support placed at 10,680.
But, bears are slowly tightening their grip on D-Street. The Moving Average Convergence and Divergence, popularly known as MACD, gave a ‘sell’ signal on the daily charts for the first time since March 2018.
MACD is one of the most effective trend-following momentum indicators, which can be used to spot a change in the short-term trend of the market.
The outlook has become slightly bearish as the index registers a ‘sell’ signal on the MACD; however, a confirmation will come if the index consistently trades below 10,700 levels.
“In line with our projections, Nifty50 continued its slide before signing off the session with a Bearish Belt Hold kind of formation. Hence, it appears that to culminate the corrective structure it will continue its downward swing below 10601 and may test its 50-day moving average, whose value is placed around 10550 levels, before bottoming out,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“Hence, in the zone of 10,601 – 10,550 one can expect the correction to end and selectively look for stock specific opportunities. Meanwhile, daily MACD also generated a ‘sell’ signal confirming downward pressure on the markets,” he said.
Asian stocks edged up on Friday as investors kept a cautious watch on developments in U.S.-China trade negotiations, while the dollar was perched near a five-month peak against a basket of currencies thanks to the benchmark U.S. Treasury yield topping a seven-year high, Reuters reported.
Wall Street ended a choppy trading session lower on Thursday, as investors grappled with escalating trade tensions and rising oil prices. US 10-year Treasury yields closed at 3.1131 percent, maintaining their near seven-year high and pressuring rate-sensitive sectors as investors ponder whether bonds offer an attractive alternative to riskier equities.
The Dow Jones Industrial Average fell 54.95 points, or 0.22 percent, to 24,713.98, the S&P 500 lost 2.33 points, or 0.09 percent, to 2,720.13 and the Nasdaq Composite dropped 15.82 points, or 0.21 percent, to 7,382.47.
Trends on Nifty futures on the Singaporean exchange show that the Nifty could have a lower opening. SGX Nifty is currently trading around 10,670-levels.
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India’s Iranian imports rose by 49 percent from March and were 20 percent higher than a year ago, the data showed. The country is the Iran’s second-biggest buyer of crude after China. State refiners have raised their imports after Iran agreed to steep shipping discounts. Iranian imports to India, crude oil.[“Source-moneycontrol”]