Charts indicate caution alert

The Federal Reserve’s policy influenced the domestic equity market last week. The benchmark index Nifty was up by 73.40 per cent or 0.33 per cent last week. BSE Sensex advanced by 0.26 per cent. The Midcap-100 and Smallcap-100 indices outperformed by 1.34 per cent and 1.41 per cent, respectively. On the sectoral front, Nifty Realty is the top gainer with 5.34 per cent, followed by Auto with 4.23 per

cent, and Metal with 4.21 per cent. On the flipside, Nifty was the top loser with 6.17 per cent, followed by FMCG with 0.70 per cent.

For the first three days, the market breadth is extremely negative. The India VIX is down by 10.74 per cent to 12.22, the lowest close after December 13. The FIIs bought Rs945.71 this month, and DIIs bought Rs47,398.11 crore of equities.

The Nifty oscillated around the 50DMA the whole week. After spending two days below the 50DMA, it reclaimed in the last two weeks. The 10-week average acted as major support six times in the last nine weeks. Last week’s bearish engulfing candle failed to get confirmation of its implications. On a monthly chart, the Nifty is forming a long-legged Doji candle. There are only three trading sessions left in this month. The index must close above the 22,127-22,300 zone to avoid the bearish signal.

In any case, if it forms a Doji candle, it will be the second in three months. The January month’s Doji candle failed to get a confirmation for its bearish implications. In this scenario, the decline in the benchmark index must extend at least three

weeks or more. Importantly, it must close below the 10-week average. Otherwise, all corrections can be considered just a retracement of ongoing trends.

Signs of Exhaustion

Nifty on monthly chart forms long-legged Doji candle

Only 3 trading sessions this week

Index looks near extremely overbought zone

Signs of exhaustion in the trend

Index forming more indecisive candles