Technical View: Nifty forms a bearish candle; MACD triggers 'sell' signal

Nifty50 formed a bearish candle for the fourth consecutive day in a row on February 19 pushing the index below 15,000 levels on a closing basis. It breached its 5-Days EMA, as well as 13-Days EMA on its way down on the daily charts.

Bears remained in control of D-Street from the word go and the selling pressure extended in the second half of the trading sessions. Nifty50 which opened below 15,100 levels failed to recoup losses and made an intraday low of 14,898.

The index finally closed 137 points lower at 14,981 on Friday.

The index formed a bearish candle on the daily charts and a bearish engulfing pattern on the weekly charts. Moving average convergence divergence (MACD) which is a trend-following momentum indicator triggered a sell signal on daily charts suggesting more weakness ahead.

Experts are of the view that Friday’s intraday low of 14,898 will be an important support for the coming week, and a breach of which could take the index towards 14,750. Any rallies towards 15,150 could be used to go short.

“Weakness appears to be getting more pronounced among the indices as Nifty50 registered a bearish engulfing formation on weekly charts whereas as a strong bearish candle with a wide intraday trading range of 246 points was witnessed on daily charts,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“In this process of a four-day fall, from the highs 15,431 levels, daily MACD triggered a sell signal on the charts. The trajectory of this market may remain one the downside, with sell on rallies mode unless it closes above 15,150 levels,” he said.

Mohammad further added that a breach of 14,898 shall initially drag it down towards 14,750 levels. For time being, positional traders can either make use of the rally towards 15,000 or wait for a breach of 14,890 levels to create fresh shorts.