Bears fumble as Nifty forms inside bar

Nifty started the week as well as the month on a solid note as it opened with a gap-up and ended the day with gains of 1.60 per cent at 14,762.  

Moreover, the advance-decline ratio of Nifty 50 was strongly in favour of advancers as 49 stocks out of 50 ended in the green. The broader market outperformed with Nifty Mid-cap and Small-cap adding 1.79 per cent and 2.07 per cent, respectively. India VIX cooled off almost 9 per cent, but it’s still above the 25-mark.   

The price action of the day formed an inside bar as the price traded within the high and low range of the prior bar. The formation of an inside bar was quite likely as the index in the prior trading session witnessed a range of 450 points and after a trending day, the index tends to form an inside bar. 

However, there is an interesting takeaway from Monday’s session as the index managed to close above the midpoint of the prior trending bar. Usually, after the formation of the big bar, the price stalls around the midpoint of that trading bar. In the current case, the index has managed to close above the midpoint of a big bearish bar, which indicates that the bulls are regrouping.   

Going ahead, the 20-DMA, which is placed at 14,982 levels, is likely to act as a stiff resistance in the near term and a decisive move above this level would certainly indicate that the bears are losing their dominance. Whereas, on the downside, the level of 14,638 is likely to act as an immediate support level for the index and a breach of this level can weaken the index to 14,460 levels.   

Interestingly, on Monday, one distribution day expired. As a result, the total count of distribution has decreased to four. A couple of more distribution days will expire this week. Hence, the upcoming session is crucial as the upside momentum and Nifty reclaim the 20-DMA in the coming sessions. Besides, the edge, which the bears gained in the last week, would stand to lose.