Avoid long positions for now
Nifty erased all the two days' gains and formed a most bearish candle, where open is the high and close is low; Nifty declined below the 200DMA and sustained for 2 days; It means we are heading for a bigger fall; Importantly, Nifty also closed below 38.2% for the recent upswing
The domestic equity market sharply declined on a weekly expiry day, with renewed profit booking at a crucial resistance zone. The benchmark index Nifty down by 164.80 points or 0.93 per cent and settled at 17589.60. The Nifty Auto index is the top loser with 1.83 per cent. The Nifty IT, Realty, FMCG, and PSU Bank indices declined by over one per cent. Only Nifty Metal is a gainer with 0.06 per cent. All other sector indices were down by 0.33 per cent to 0.90 per cent. The India VIX is up by 2.21 per cent to 12.72. The Market breadth turned negative again as 1186 declines and 755 advances. About 54 stocks hit a new 52-week high, and 72 stocks traded in the upper circuit. Adani Enterprises, Reliance, and HDFC Bank were the top trading counters today in terms of value.
The Nifty erased all the two days' gains. It formed a most bearish candle, where open is the high and close is low. After sustaining above 20DMA for two days, it declined lower and closed below the 200EMA again. After a long time, the expiry day witnessed huge volatility. As the Nifty formed outside the bar, Wednesday's bullish candle doesn’t have any relevance. If we consider Monday's shooting at confluence has got its bearish implications confirmed. Volumes are higher than the previous day, but still below average. The Nifty also closed below the moving average ribbon on daily and hourly time frames.
The RSI once again decline below the 50 zone. As we forecasted, the Nifty faced strong resistance at the 61.8 per cent retracement level of the prior downswing and reacted on the downside. The Nifty closed below the previous day's low. With today's fall, we consider Monday's high is the swing high. In any case, the index declines below the 200DMA and sustains for two days, which means we are heading for a bigger fall. Importantly, the Nifty also closed below 38.2 per cent for the recent upswing. The next level of supports is placed at 17527 and 17463. The 200DMA support is at 17427. If these supports were broken, the next strong, meaningful support would be only the previous low of 17255. If the Nifty continues to fall, the channel support is placed at 16918. With all probabilities, Nifty can test this level in the current month. There is no sense in holding long positions currently.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
