Bulls in no mood to give up; 17,250 level is crucial on downside!

On Monday, Nifty closed on a flat to negative bias due to a lack of any major triggers. Nifty ended at 17,355.30 with a loss of 13.95 points. Nifty Media and Metal indices are up by 1.3 per cent each. Nifty IT index has gained 0.94 per cent. Meanwhile, Nifty Bank and the energy index declined 0.58 per cent and 0.53 per cent, respectively. The overall market breadth is slightly positive with 1,007 advances and 962 declines. India VIX is up by 0.59 per cent. About 113 stocks hit a new 52-week high while 143 stocks traded in the upper circuit.  

Nifty formed another long lower shadow candle. The initial losses have gradually recovered and it closed almost flat. Monday’s candle had one of the smallest bodies, with a long lower shadow that resembles Dragonfly Doji. It has almost tested the previous day’s high with just one point shy. The last two days' price action is limited to Wednesday's range. Before making a decisive trending move, Nifty is consolidating as expected earlier.  

For the next two days, the range of 17,254-383 is significant for the market as it is consolidating between these levels. The indicators are cooling off from the extreme overbought condition. The daily RSI declined to 80.6 from 83.39 in the last four days. This may retest the near the zone of 60 in the current consolidation, which is healthy for the market.  

The distance between 20-DMA and the price has also declined to 2.59 per cent from 4.06 per cent, which was four days ago. Retesting of 20-DMA (16917) is the highest probability during this consolidation. Currently, it is better to focus on stock-specific action and apply neutral strategies in indices. Nifty may resume prior trend only if it closes above 17,383.