Index trend and stocks in action November 18, 2019

The previous week played out very much on the expected lines, with the Nifty 50 index consolidating in the range of 11,800-12,050. During the week, the macro data did not cheer the markets as the CPI came at 4.62 per cent, higher than the RBI's target of 4 per cent. Market participants feared that this may put brakes on the rate cut cycle by the RBI. Further, a series of downgrades in the projection of the September quarter's GDP growth by financial institutions kept market participants on a tenterhook. However, the markets navigated through all these obstacles and closed the week on a flat note, with Nifty posting minuscule losses of 0.11 per cent WoW basis. For the second week in the row, the index formed an indecisive candle on the weekly timeframe. Usually, the formation of such back to back patterns at swing highs after a massive rally from lower levels could reflect an ongoing choppy trend with restricted weakness.

On the last trading session of the week, that is, on Friday, the Nifty opened with an upside gap and inched higher. However, in the second half of the trading session, the index saw a sharp reversal from higher levels and closed towards the low for the day. This led to the formation of a Gravestone Doji-like pattern on the daily timeframe. At present, it has recorded about 3 distribution days. In any case, if the index adds another two distribution days going ahead, the market's structure will shift from a confirmed uptrend to uptrend under pressure.

Furthermore, the levels of 11,980 and 12,050 are expected to play out as a stiff resistance while support is expected at the 11,800 mark. As long as this support level is held, we will continue to see the markets trading in the range of 11,800-12,050. However, in the event of any breakdown below 11,800, the range is expected to get wider and on the downside and the Nifty is expected to touch levels of 11,670-11,700 mark. The zone of 11,670-11,700 is a crucial area as per the principle of polarity, which points out that once a resistance level is breached, it changes its nature and becomes support the next time it is approached.  On the upside, any close above 11,980-12,000 will take us to the all-time high levels and above. There are a couple of factors, which are hinting towards a negative bias in the coming week.  The Nifty has already breached an important up trending trendline support on Wednesday. It is sustaining below that support at present, which is a sign of weakness. Further, the MACD histogram is in the negative zone for the past three days, which is another bearish sign.

Overall, the Nifty is looking exhausted and the back to back formation of indecisive candles on the weekly chart. This factor, along with several pieces of evidence of the bearish market, maybe giving some suspicious vibes about the continuity of the bullish bias in the markets but it does not mean that we should go ahead and shot the markets blindly. As of now, the confirmation of an indecisiveness candle pattern is very much required and a close below 11,800 mark would give the confirmation. On the other hand, market participants are waiting to see if bulls can confirm a close above 12,050 to play the aggressive mode on the long side. A decisive close above 12,050 would open up for a decent up move in the short term.