Better to stay neutral in indecisive mkt

Counter-Trend Consolidation

♦ Market breadth is positive

♦ 75 stocks hit a new 52-wk high

♦ 71 stocks traded in the upper circuit

♦ Nifty tested the prior breakout and bounced

♦ It formed an outside bar

Before the F&O expiry, the equity market was nervous and traded in a wide range. NSE Nifty closed with 51.75 points or 0.26 per cent gain. The Banks and Financials were negative on Wednesday, and all other sectoral indices were closed positive. Bank Nifty was down by 35.90 points, and the FinNifty declined by 0.13 per cent. Nifty Pharma is the top gainer with 1.19 per cent. All other sector indices gained by less than one per cent. The India VIX is up by 3.58 per cent and closed at 11.58. The market breadth is positive. About 75 stocks hit a new 52-week high and 71 stocks traded in the upper circuit. HDFC Bank, ICICI Bank and Reliance were the top trading counters today in terms of value.

The Nifty tested the prior breakout and bounced. It formed an outside bar. The index almost tested the Monday high. The daily range has increased to 177 points. The index opened at the previous day’s low and closed above the high. But the volumes are not encouraging after this big move. It is still below the 20DMA. The Bollinger bands further contracted. As stated earlier, the counter-trend consolidation will continue for some more time. The expiry will be a tricky one. However, the probability of the index closing below today’s low of 19,554 is very low. The RSI is still flat at the 50 zone. The MACD histogram shows a negative momentum.

The Elder’s impulse system has formed another bearish bar, even after a big bar and positive closing. The India VIX increase, for the last three days, indicates it will further increase. The recent lower range of 10.5 can be a bottom for now. The Open Interest shows, long built-up. A day before the derivatives expiry, the rollovers are at 51.59. If these rollovers increase above 76 per cent, it will indicate the continuation of the trend. As there is no clear trend visible, it is better to be with a neutral bias. A close above the 19,734 will give a clear reversal and test the 19,888 points. But if Nifty fails to do so, the consolidation will continue for more time. On the downside, the 19,554-19,734 zone acts as crucial support and resistance.

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