Tech view: Nifty50 hits 52-week high, but chart still favours bears; reversal likely

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NEW DELHI: The Nifty50 on Thursday took its winning streak to a sixth straight session and hit its 52-week high during the day. But it could not close above the 8,950 mark.

The index formed a narrow red body with a long upper shadow on the daily chart, as the index settled below its opening level and saw good buying through the day, before giving away gains.

While no clear candlestick pattern was visible on the chart at close, a narrow range body for the day after a ‘Doji’ formation on Wednesday showed the index just kept the positive momentum going. Analysts are not expecting much upside for the index unless something concrete happens on the technical front. Technical charts are favouring bears now, they said. (See table)

The index opened on a positive note. It hit its one-year high of 8,982.15 during the session, before losing ground. The index eventually settled the day at 8,939, up 0.14 per cent. It was the second session in a row and tenth session in the past 15 sessions, when the index settled below its opening level.

“The breadth of the market is not behaving the way one would probably anticipate when you are trading at fresh 52-week highs. That is the dichotomy which could probably have a short-term reversal. The market may not probably correct significantly, but from a trading perspective, it is prudent enough to take out long from the index, wait for couple of days before you see any sort of reversal signs as such,” said Kunal Bothra, an Independent Market Analyst.

Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory at Chartviewindia.in said that the narrow Adavce to Decline ratio is suggesting profit taking in the broader market.

“Technical set up is completely favouring bears at this juncture as a number of sell signals on lower time frame charts is increasing. But as liquidity is still favouring the bulls, we advise traders not to get carried away by gains, but to ride it with lot of caution and wait for confirmation of clear-cut reversal signs, which looks inevitable sooner than later,” said Mohammad.

Chandan Taparia, Derivatives and Technical Analyst at Motilal Oswal Securities said that the Nifty50 needs to hold above 8,888 to extend its up move towards 9,000 and its life-time high of 9,119.