Nifty: Bears Gain the Upper Hand

Sat, 20 Feb Momentum Moves

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The Week Gone By

The tug of war between bulls and bears ended on negative note for the Nifty this week.

The index fell below the 15,000 level.

Bears have the upper hand as only a couple of sectors moved higher. This lack of broad based buying is unconvincing for the bullish momentum.

Energy stocks lead the way this week. I had highlighted this at the start of February. Watch my video on energy stocks here.

The Week Ahead: Bears Growl at Rising Channel Resistance

The post budget rally seems to be fading at the current levels. Momentum above 15,000 Nifty is facing resistance at upper band of the rising channel.

On the weekly chart, index has formed a bearish engulfing candlestick pattern. Bearish Engulfing is reversal in nature and marks an end of the bullish momentum.

The 11 months rising channel which we discussed in the previous edition indicates resistance at 15,370. The index made a high of 15,431 and is now back below 15,000.

In today's video, I'll discuss this in detail...

Nifty Daily Chart

 

Index not only faced resistance but the negative divergence here on the Relative Strength Index (RSI) indicates the bulls are losing momentum.

RSI negative divergence setups are a sign of bearish momentum. In this set up, the price hits new high but RSI fails to do so. This indicates exhaustion.

The index also reversed from multiple Fibonacci retracement levels.

Nifty at Multiple Fibonacci Retracement & Negative Crossovers

As we discussed Nifty reversing from the upper band of the channel, it also had a hurdle at 161.80% Fibonacci retracement of 14,753 to 13,596 at 15,468 (red line below) near the level of the channel.

The multiple Fibonacci retracement levels at 161.80% of 15,251 to 14,982 was placed at 15,417.

Historically, we have seen Nifty resist at 127.20% or 161.80% Fibonacci level (the green lines) of its previous moves. It has played out similarly this time as well.

 

The index has reversed from multiple Fibonacci retracement zones and gave a negative crossover of the 9 EMA (Exponential Moving Average) over the 21 EMA on the hourly chart.

This negative crossover confirms the bears now have the upper hand in the market.

Nifty FMCG Index at Do-or-Die levels

As Nifty reversed from a high of 15,431 to 14,900 levels, the FMCG Index chart is also losing its bullish momentum.

FMCG was the flavor of the week post budget as traders felt No Negative is a Positive. This saw ITC roaring higher.

The rally halted right near the previous high of 35,000 and is back to 33,200 levels.

Is the rally in FMCG losing ground?

Nifty FMCG

 

The index is trading at support of do-or-die levels at 32,600-33,000.

The bulls need to protect this support zone to gain lost ground and win the battle.

In case bears break the support of 32,600, we believe this index will form major top and a test of 26,000 which is a fall of 20% cannot be ruled out.

Well this is my medium term technical view on FMCG index.

Conclusion

Nifty has reversed exactly as discussed in our previous edition of Momentum Moves.

The multiple resistance zone of 15,400 has played it part and bears have an upper hand in the short term.

In the previous edition, we also discussed the Nasdaq. I said it could reverse from 13,700-14,000. It's now back to 13,500 levels from a high of 13,879.80 forming a dark cloud cover candlestick pattern.

If Nasdaq continues its southwards journey, Nifty will join in as the short-term chart of Nifty has witnessed a bearish crossover of the exponential moving average.

Bears could take charge for the next 2-3 weeks.

FMCG index is at do-or-die levels. Bulls need to power-up and protect the zone of 32,600-33,000. If bears take the lead, expect a dip of about 20% for the FMCG index in the next few months.

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