Bollinger bands indicate impulsive move

The equities traded nervously and failed to sustain at higher levels. NSE Nifty gained by 12.50 points or 0.05 per cent and closed at 23,346.70 points. The Oil and Gas is the top gainer with 0.73 per cent, the Media, IT, and PSU Bank indices gained by less than half a per cent. The Consumer Durable index is the top loser with 1.39 per cent, followed by the CPSE index with 1.06 per cent. The Metal, Midcap, Pharma, Realty, and Healthcare indices are down by over half a per cent. The India VIX is up by 0.19 per cent to 18.26. The market breadth as 1,651 declines and 1,192 advances. About 31 stocks hit a new 52-week low, and 67 stocks traded in the lower circuit. Sonata Software, Reliance, Eternal, Mazdock, and HDFC Bank were the top trading counters in terms of value.

In a volatile session, the Nifty failed to sustain at higher levels. It formed a long upper shadow candle and closed below 24,375 after several efforts. It declined by 350 points from the day’s high and formed a Shooting Star candle. The long consolidation with an indecisive and bearish candle indicates that the market is not in a mood to move higher. During the last seven days, the index moved in a 741-point range and closed at the previous week’s high.

The RSI has been flat for the last four days. This session’s important technical development is that the index faced strong resistance at the 61.8 per cent retracement level of the prior fall. So, as long as it trades below the 24,545 points, it is better to stay on the sidelines and wait for a directional bias. The Bollinger bands are contracted on an hourly chart, indicating a probable impulse move. The daily RSI negative divergence needs confirmation for the reversal. The Nifty must form a lower low below the 8EMA of 24,178 for the signal to reversal. A decisive close below 24,010 and 23,962 is a strong bearish signal. We may get a clear signal next week for either side breakout.

(The author is partner, Wealocity Analytics, Sebi-registered research analyst, chief mentor, Indus School of Technical Analysis, financial journalist, technical analyst and trainer)