- After showing a fine upside breakout in last session, Nifty showed follow-through upmove today, but was not able to sustain the intraday gains and closed the day higher by around 15 points.
- Nifty opened today with positive note and shifted into further upmove during early to mid-part of session. It made a new alltime high of around 9830 levels and showed intraday weakness from the highs.
- We observe a formation small negative candle today with minor gap up opening and with long upper shadow. This pattern is suggesting an emergence of profit booking from the highs. The market breadth was weak today as advance decline ratio (AD ratio) stood more than 1:2 levels.
- Though, today’s pattern is resembling a short term top reversal pattern, but there is no confirmation of any reversal indication. Hence, we need further weakness below 9760-50 levels to call this as a near term reversal pattern.
- We observe a formation of negative divergence pattern in Nifty and in daily RSI (higher high formation in Nifty and lower high formation in RSI).
- This divergence action could indicate a possibility of consolidation or minor correction in the market for short term. Normally, divergence signals are viewed for minor corrections in the underlying’s (but, repeated sharp divergences are indicative of top reversal patterns).
Conclusion & Strategy:
- The underlying short term trend of Nifty continues to be positive. Intraday weakness of today’s session is not showing any red-flag signal for the short term trend of Nifty.
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- Having moved up sharply in the last few sessions, the consolidation or minor correction is expected in the next 1-2 sessions. Immediate supports to be watched is around 9720-9730 levels.