Better not to hold short positions for now

The benchmark indices closed on a flat note. NSE Nifty closed almost at the previous close, at 19,674.55 points. The Nifty realty index is the top gainer with 1.52 per cent. The FinNifty is up by 0.5 per cent. The Nifty IT and Pharma indices were the top losers, with 0.78 per cent and 0.73 per cent, respectively. The Pharma, Metal, and Auto indices closed with negative bias. All other indices gained moderately. The India VIX is up 2.25 per cent to 10.90. The market breadth is positive. About 73 stocks hit a new 52-week high, and 75 stocks traded in the upper circuit. HDFC Bank, Bajaj Finance, and Reliance were the top trading counters today in terms of value.

The Nifty has formed a perfect Doji candle after over three per cent decline. Before, it took a support at 50DMA. As we discussed, the bounce from the 19,585-19,626 support zone is a reality now. The index closed flat, showing the tiredness in the trend. Now, today’s low of 19,601 is crucial for now. As long as the index trades above this level, be with a positive. In any case, it closes above the 20DMA of Rs19,699 points, The bounce may extend up to 19,880-19,912 zone of resistance. We need to see the behaviour around this level. As the expiry is scheduled in the next three days, we need to be cautious. The positive divergence in RSI is clearly visible on an hourly chart. It closed just above the 40 zone and signals, coming out of an oversold zone.

The Hourly MACD has given a bullish signal. Monday’s volumes were lower, indicating that the traders are not interested in taking fresh positions aggressively. The Open Interest is up by 12.06 per cent, showing the long built-up. There are 104 stocks seen long built up in the derivatives segment. This data shows the index has formed a short-term bottom at 19,601 points. A higher low candle is enough for a pullback towards the 19,880 zone of resistance. It is better not to hold the short positions for now, be with neutral to positive bias.

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