Bollinger Bands Suggest Further Consolidation

Nifty declined sharply in last hour and formed a long-legged, small-body candle.The last two days of positive closings with declining volume are still a worry.The breadth was improved, and the broader market participation was positive

NSE Nifty once again registered a smart recovery from the initial losses with broader participation as it gained by 104.70 points or 0.42 per cent and closed at 25,041.10 points. The Nifty IT is the top gainer with 1.73 per cent, followed by Mid and Smallcap indices with 1.15 per cent. The Pharma and Healthcare indices were also up by over one per cent. The FinNifty and PSU Bank indices were the loser today with 0.31 per cent and 0.05 per cent. The Oil and Gas index is also down by 0.24 per cent. The India VIX is down by 6.16 per cent to 13.36. The Market breadth is positive as 1,877 advances and 854 declines. About 148 stocks hit a new 52-week high, and 124 stocks traded in the upper circuit. Premier Energies, Paytm, HDFC Bank, and Jiofin were the top trading counters on Tuesday in terms of value.

The Nifty tested above 25,100 levels, but failed to sustain at higher levels. It declined sharply in the last hour and formed a long-legged, small-body candle. The last hour’s fall was due to heavy volume, which raised doubts about continuing the rally. The last two days of positive closings with declining volume are still a worry. Importantly, the index was finally able to close marginally above the 8EMA with the last 15 minutes of recovery. The Nifty also took support at the 20DMA for the second day. The index also closed below Friday’s high. The breadth was improved, and the broader market participation was positive for the day. The RSI (57.67) reached near the 60 zone. The MACD histogram still shows bearish momentum. The Stochastic RSI is also still bearish. The Anchored VWAP resistance acted as a strong barrier for the upside move. The Bollinger bands contraction suggests further consolidation on the cards. The overall trend remains volatile and rangebound. Unless the index negates last week’s bearish engulfing implications, it is better to take a cautious approach. As stated earlier, the focus should be on the IT, FMCG, and pharma sectors.

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