Nifty forms inside bar pattern; 14,600 becomes crucial support level

Finally, Nifty snapped its five-day losing streak as it ended the day with modest gains of 0.22 per cent, just above the 14,700 mark.  

Nifty began the day with a gap-up and thereafter, it turned volatile and hit an intraday low of 14,651 levels. After registering an intraday low, the index went onto show a strong pullback and marked an intraday high of 14,854. However, in the latter part of the session, the index marked bulk gains amid high volatility. The broader indices outperformed the frontline gauges as Nifty Mid-cap and Small-cap gained 0.93 per cent and 0.89 per cent, respectively.   

The price action of the day formed a small body bearish candle with minor lower shadow as this candle was placed within the high-low range of the previous bar i.e., Monday candle, and in technical parlance, this is called an inside bar. With this, the index negated its formation of lower lows, but it continued to form lower highs.    

On Tuesday, during the pullback attempt, the bulls failed to move above the 21-EMA and 61.8 per cent retracement of the prior bar. This clearly indicates that the pullback is being used to lighten positions. Going ahead, as long as the index trades within the high-low of Monday’s session, the index may move in a range with higher volatility.   

The index is currently trading below its important short-term moving averages i.e., 5, 8, and 21-EMA. However, the bulls seem to be taking some comfort from 34-EMA, as it has offered support to the bulls in the past couple of trading sessions. A move below the 14,600 levels would open gates for a further correction towards the level of 14,340-14,440.   

On the upside, for the bulls to regain their strength, it’s important for Nifty to sustain above the 21-EMA. As long as the index does not close above its 21-EMA, it would be a sell-on-rise market.