Index trend and stocks in action on August 20, 2020

The bulls recorded a hat-trick of gains as Nifty ascended higher for the third straight day and ended the day above 11,400 mark with gains of 0.20 per cent.

The price action of the day formed a bearish candle. After opening the day with a gap up, the index traded in a very tight range of roughly 66 points throughout the day. On Tuesday, the index witnessed a breakout after a long consolidation with a strong bullish bar but the follow-through price action is not convincing. Usually, after any security breakout of the range or a consolidation, their move is quite fast and swift but in the current scenario, their moves have been tepid, which is not giving any confidence to the bulls.

However, if we analyse the bar by bar action, the trend is certainly up as the price is registering higher lows since the recent swing low of 11,111.45. Even though Nifty closed in the positive territory, the bear candle is giving some kind of suspicion about the trend. The volume shrunk further lower than the previous day. After a subdued volume breakout, followed by a low volume on a follow-through day, it’s indicating a suspicious move. Also, the trend strength indicator ADX is moving southwards, despite when the index moving upwards. The RSI is still below the August 11 mark. Because of this price structure, one should exercise caution.

On the downside, important support is placed around 11,250 levels, followed by 11,180 levels. While on the upside, the levels of 11,460, followed by 11,563, are likely to act as a hurdle for the bulls.

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