Bulls Exhausted At Higher Levels

The Week Gone By

The tug-of-war between bulls and bears in the market ended on a flat to marginally positive note.

Surprisingly, on all the four days of the week, Nifty opened gap-up and bulls were unable to hold the markets higher.

In a truncated week, the first three days of momentum belonged to bulls. The bears on Friday were geared up in the second half of the day to slap the bulls down from 15,300 to 14,950.

As we highlighted in our last's week Momentum Moves, a time correction is on cards. The market might remain in the range of 14,450-15,300. It hit a high of 15,336 in a gap-up but didn't even hold for the first 30 minutes of the day.

Before closing the week, the index has passed the ball in the bears court which we will analyse on the charts in this week's Momentum Moves.

 

 

The Week Ahead

The bulls on D-street seems to be exhausted. They could not capitalise on the gap-up openings for four consecutive sessions.

Even after opening higher on Friday above 15,300, the bears took the opportunity to drag markets lower.

The medium term chart is indicating the trend is bullish as index is trading in rising channel formation.

Daily Nifty Chart

 

 

 

The above is a daily bar chart of Nifty which is trading in rising channel (marked parallel blue lines).

Even though markets rallied from 14,500 to 15,300 levels, RSI (Relative Strength Index) is trending between 40-60. This shows a lack of strength in the momentum.

The index trading in the range of 14,450-15,300 and the RSI hovering in the range of 40-60 is to me a sign of lacklustre momentum in the market.

Even we look at the candlestick on daily chart, the bears might get excited even as the markets trend higher.

Nifty Chart

 

 

 

Analysing the candlestick chart above, we see that it has formed Bearish Engulfing pattern. It marks an end of bullish momentum and start of a bearish trend. The confirmation will be below the low of candle which is 14,953.

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Disclosure: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research ...

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