Tech View: Nifty sends out sell signal on MACD; it's a 'sell on rise' market

NEW DELHI: Nifty50 on Monday took a beating, falling below the 17,400 mark, far off its immediate support at 17,500, to send out weak signals. The fact that the index fall came after Friday's Dark Cloud Cover formation and that the momentum indicator MACD has sent out 'sell' signals suggest that the index could be in for some more pain ahead.

The 17,240-270 levels can offer some support to the index going ahead, analysts said.

For the day, the index closed at 17,396, down 188 points or 1.07 per cent. It formed a bearish candle on the daily chart.

"A key takeaway from Monday's session was the fact that a recovery attempt post the sharp gap-down opening was sold off, leaving a long upper shadow on the index, hinting that this market may be changing its trajectory from 'buy on dips' to 'sell on rallies' mode," said Mazhar Mohammad of Chartviewindia.in.

Mohammad said more technical indicators are slipping into 'sell' mode, with the latest being the daily MACD. The only solace for the bulls is the fact that Nifty50 is holding above its critical short-term moving averages.

"Hence, a bounce going forward can't be ruled out, but it will remain vulnerable for a sell off," he said.

Chandan Taparia of Motilal Oswal Securities saidthe index has negated its higher high-low formation of the last four sessions. As long as the index holds below the 17,600 level, any bounce could find selling pressure towards 17,350 and 17,272 levels, Taparia said.

This analyst sees an upside hurdle at the 17,777 level.

Independent analyst Manish Shah said Nifty's fall of over 400 points in the last two sessions has been the largest two-day decline in the last couple of months.

"The underlying trend is still intact, but we have to be careful as Nifty50 may be getting for a prolonged corrective decline. It is going to be a bit tricky navigating the markets for the next couple of days. Support for Nifty50 is at the 17,240 level, and we could also see a decline towards 17,050. For the momentum to turn positive, Nifty50 needs to move above 17,580 and 17,600 levels," he said.