Avoid highly leveraged positions

Equities declined again with renewed broad-based selling pressure. NSE Nifty is down by 129 points or 0.74 per cent. The Realty index is the top gainer with 2.06 per cent. The CPSE, PSE and Energy indices also closed positively. The Nifty IT is the top loser with 1.26 per cent. Bank Nifty, FinNifty, and Auto indices declined by over 0.83 per cent. All other indices lower by 0.1 to 0.75 per cent. The market breadth is negative as 1,158 declines and 787 advances. About 63 stocks hit a new 52-week low, and 81 stocks traded in the upper circuit. Adani Enterprises, HDFC Bank, and Powergrid were the top trading counters on Thursday in terms of value.

Wednesday’s positive momentum was not sustained and erased most of the gains. The Nifty declined below the previous day's low. It opened with a gap down and failed to get intraday bounces. It closed below the 200DMA again. For the four days, the Nifty oscillated around this important long-term moving average. By closing below the previous day's low, the bears are under control on the market. The bulls failed to get a follow-through day for a successful rally attempt. Interestingly, except for Realty and Energy, all the sectoral indices declined. Yesterday's gain was with lower volume, but today the selling pressure is with strong volume, which indicates more pain in the system. The breadth turned negative again. On an hourly chart, the moving average ribbon acted as resistance at the opening itself. After forming a big bearish candle in the first hour, the market hardly bounced about 50 points. Both the Bank Nifty and Nifty closed near the day low. The IT and the BFSI sector, which led yesterday's rally, also caused the fall today.

Technically, the Nifty is trading below all key long and short-term averages. Now, the 200EMA also entered into a downtrend. The Nifty is 3.08 per cent below the 50DMA and 2.25 per cent below the 20DMA. The Elder impulse system has formed a strong bearish bar again. Only a close above the 200EMA will be positive and test 50DMA. But if the weekly close is below the 200DMA of 17,397 and the 40-week average of 17,445 points, it will be a strong negative for the market. Avoid highly leveraged positions at the weekend.

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