Charts indicating indecisive trading

On a highly volatile day, the equity benchmark indices hit a new record high. But NSE Nifty was unable sustain at a higher level due to huge profit booking. The Nifty declined by 38.55 points or 0.17 per cent and closed at 22,604.85 points. The Nifty Auto and Realty indices were the top gainers with 1.82 per cent and 1.45 per cent. The Nifty IT, Media, and Metal indices were top losers with 1 to 1.13 per cent. All other sector indices gained or lost by less than a per cent.

The India VIX is up by 5.19 per cent to 12.87. The market breadth is negative as 1,403 declines and 1,220 advances. About 155 stocks hit a new 52-week high, and 118 stocks traded in the upper circuit. HDFC Bank, REC, ICICI Bank, and Kotak Bank were the top trading counters today, in terms of value.

The Nifty hit a new lifetime high after 12 days of consolidation. Bank Nifty continued the rally and closed at a new high for the second successive day. Soon after the all-time highs, both indices declined sharply with high volumes. The Nifty recorded the highest volumes in three days and registered the distribution day. It declined by 215 points from the day’s high and closed below the prior day’s high. It formed a strong bearish candle, a Shooting Star. The last hour’s high volume fall has erased Monday’s gain. Interestingly, the index is repeating its behaviour, high volume declines and low volume advancing days. This behaviour is giving an element of doubt on the trend. Importantly, the index was not providing any weaker signals, as the declines were limited to three days. The RSI again reacted from the 60 zone and closed below the previous day.

On a monthly chart, the Nifty closed above last month’s high, but volumes declined for the third consecutive month, reaching their lowest level in four months. It also formed higher highs and higher lows on the monthly chart. Remarkably, the index has formed a similar candle on a weekly chart, like prior highs. There are several confusing signals in the market direction. The VIX is up for the second day by 5.19 per cent. The low VIX conditions will harm the trend. Monday’s top contributors, HDFC Bank and ICICI Bank, are the top draggers of the Nifty. Let’s stay with cautious optimism as long as the index trades above the 22,350 points.

(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)