Avoid long positions below 20DMA

History repeated again on a budget day. The volatility has increased. NSE Nifty traded in the 619 points range and finally settled with 45.85 points negative at 17616.30. Only FMCG and IT indices closed with 1.13 per cent and 0.93 per cent gains. The PSU banks were the worst hit with 5.68 per cent. The Metal index declined by 4.5 per cent. The Media index is down by 2.7 per cent, and Energy is lower by 1.31 per cent. The PSE and CPSE indices are down by 1.96 per cent and 1.42 per cent. All other indices also closed lower. The Market breadth is extremely negative as 1421 declines and 535 declines. About 88 stocks hit a new 52-week low, and 101 stocks traded in the upper circuit. All the Adani Group stocks are lower. Adani Enterprises lost by 26.7 per cent and Adanport down by 17.73 per cent. Adani Enterprise, ICICI Bank, and Ambuja cement were the top trading counters today in terms of value.

After 2021, the Nifty traded again in over 600 points range on a Budget day. It has formed a long-legged, engulfing candle. It tested the 20DMA and faced resistance, and it declined sharply. It almost declined near the 200DMA. The index has formed a lower low candle. The initial bullish bias was spoiled by the Adani group stocks as Credit Suisse stopped accepting the Adani group's bonds as collateral. This news has become a systemic issue for the market. The budget has become a non-event for the market, as it continued the previous trend. Any kind of short covering may lead to a bounce. But, today's high of 17972 and 20 DMA of 17926 zone will act as a crucial resistance. Only above this will the market reverse on the upside.

On a longer-term chart, the December month's bearish engulfing candle got the confirmation of Tuesday's close. All the tops were formed bearish engulfing candles and reversed. For now, the 200 DMA is at 17290, which may act as a strong support zone. In any case, if the Nifty declines below this level, we may see all-round selling pressure. As the weekly derivatives expiry is on, expect the volatility to be higher. It may form an inside bar tomorrow. Better avoid long positions below 20DMA.

(The author is Chief Mentor, Indus School of Technical

Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)