The benchmark Nifty 50 index had been showing a relatively higher strength than Nifty Bank in the last week. But this week turned out to be not so good for bulls as not just the index could not surge to an all-time high but it also closed negative for the week.
The selling pressure from the ATH levels seems quite evident. Despite multiple attempts, the Nifty 50 couldn’t soar to a new high. This week also ended with a loss of around 0.84%, the biggest weekly loss after April 2023, majorly due to selling in the last 2 sessions.
While doing the previous week’s analysis, it looked like the index will make a new high this week. But now it seems like the profit booking from the higher levels might deprive the index of scaling to an ATH in the next week as well. The reason is pretty simple - the formation of a Dark Cloud Cover on the weekly time frame.
This is a bearish reversal candlestick pattern that is known to reverse a prior uptrend to an impending downtrend. The formation of this signal has taken place on a higher time frame - weekly chart therefore the reliability of it has further increased. Also, any kind of reversal pattern that forms at the very top or bottom has a higher importance than the same pattern forming somewhere in the middle of a trend.
Another thing to consider, if you look closely, the index hasn’t moved much in over 17 days. The rate of Nifty 50 on 7 June 2023 is the same as it is today. This is another signal of mounting selling pressure from the top. But the biggest reason why I am becoming bearish on Nifty is the selling in the midcap and small-cap spaces.
Till now, only frontline shares were facing some hurdle but the small and mid-cap spaces were roaring like anything! The Nifty Midcap 100 index made its first weekly red candle after 12 consecutive green weeks and closed at the lower end of the week. In a similar fashion, Nifty Smallcap 100 index also closed this week in the red, after 12 straight positive weeks.
This price action shows that this time the selling is taking place left right and center and due to this market-wide weakening sentiment, I am turning bearish on Nifty 50.
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