Tech View: Nifty forms Dark Cloud Cover, gives bears an upper hand

NEW DELHI: Nifty halted a three-day winning streak on Monday and ended up forming a ‘Dark Cloud Cover’ on the daily chart.

Such a pattern is formed when after a gap-up start, the index ends up retracing than 50 per cent of the previous day’s gains and, thus, ends up forming a ‘dark cloud’ over the preceding candle.

Technically, the formation of this pattern at the swing high or near a hurdle indicates further weakness ahead, said Nagaraj Shetti of HDFC Securities.


“Nifty’s short-term trend is on the verge of a downward reversal. A sustainable move below the 12,000 level could open up more weakness ahead. The key overhead resistance to be watched is around 12,150-200 levels,” Shetti said.

The daily upper Bollinger Band, which has fallen flat over the last few sessions, acted as a barrier on the upside, said Gaurav Ratnaparkhi of Sharekhan.

The 50-pack index ended the day at 12,060, down 26 points or 0.22 per cent.

“Nifty turned southward from the upper end of the trading range, which is around the 12,150-12,135 range. A sustained trade below the 12,040 level will extend the profit booking to 11,980-11,940 levels. On the flip side, a trade beyond the 12,085 level will take it back to the upper end of the 12,135-12,150 range. Moreover, the RSI has turned lower from the resistance at 60, suggesting a weakening uptrend,” said Aditya Agarwala of YES Securities.

Ratnaparkhi said the 12,134-12,158 range now becomes a significant resistance zone. “If the bulls manage to overcome this hurdle, then the index can march towards its short-term target at 12,350. On the flip side, the recent gap area between 12,023 and 12,005 levels would be an immediate support zone to keep a tab on,” he said.