Better to stay neutral to negative bias for next 3 sessions
MACD below 20-week average shows a decline in bullish momentum
The equities declined sharply on a monthly expiry day. NSE Nifty erased the last six days move and closed below the key supports. It declined by 226.35 points or 1.25 per cent. None of the sector indices closed with gains. The PSU Bank index, down by 3.58 per cent, is the top loser. The Bank Nifty was down by 2.54 per cent, and the FinNifty was lower by 2.61 per cent. The Nifty Energy, Realty, Infra and Pharma lost over one per cent to 1.9 per cent. All other indices down by less than a percentage point. The broader market breadth is extremely negative as 1553 declines and 384 advances. About 80 stocks hit new 52-week lows and 71 stocks traded in the lower circuit. This data shows the weakness presence in the market. Ambuja Cements, SBI, and Reliance were the top trading counters today.
The Nifty has registered the sharpest decline in the recent downtrend. After a series of indecisive bars, the stronger bearish candle depicts the weakness presence in the market. The index declined below the 100DMA and 20DMA decisively. It also declined below the 20Week average. As one can assume that Tuesday's high was a minor high. For all practical purposes, the 18201-265 is a strong resistance zone. Only above this level, which is also a 50DMA, will increase the possibilities of moving higher. If the Nifty closes decisively below 18000, which is also almost a midpoint and the psychological level, it will resume the bearish trend. The weekly closing is very important for the clues for market direction.
As said earlier, the Nifty may not break the range before the Budget. The Relative Strength Index (RSI) declined below the rising trend line, and a rising wedge is negative. It is also near the bearish zone. After oscillating around 50, it finally gave up its strength. On a weekly chart, it has formed a bearish engulfing candle. It tested the eight-day low. The MACD shows a decline in the bullish momentum. By closing near the range and below the 20-week average, it's better to have leveraged position on the upside. On the hourly, the index closed below the moving average, and the MACD declined below the Zero line. The Elder impulse system has formed a strong bearish bar. The index declined 1.98 per cent below the 50 DMA. It is also 0.74 per cent below the 20DMA. For now, be with a neutral to negative bias for the next three trading sessions.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)