Daily RSI Back In Neutral Zone

The equities rebounded after a big fall. The Nifty gained by 374.25 points or 1.69 per cent and closed at 22535.85. All the sectoral indices closed positively today. The Nifty Media is the top gainer with 4.72 per cent. The PSU Bank, Consumer Durable indices gained by 2.59 per cent and 2.64 per cent, respectively. The Realty, Microcap, Oil and Gas, Smallcap, Midcap and FMCG indices gained over two per cent. All other indices gained by 1 -2 per cent. The India VIX is cooled off by 9.05 per cent to 20.73. The Market breadth is positive as 2391 advances and 499 declines. About 22 stocks hit a new 52-week low, and 124 stocks traded in the upper circuit. HDFC Bank, Reliance, BSE, Infosys, and TCS were the top trading counters in terms of value.

The Nifty tested the 38.2 per cent retracement level of the current downswing. It rallied 953.55 points from Monday’s opening low. The volume was much lower than the previous day. It formed a long-legged, small-body candle. On an hourly chart, the index faced resistance at the moving average ribbon, and the hourly MACD is still below the zero line. The daily RSI is back in the neutral zone. As the index failed to sustain above the 38.2 per cent retracement level (22556), It can act as resistance for the next day. Even after the 4.39 per cent rally from the low, the index is still trading below all key short-term averages. As the Trump administration threatens to impose another 50 per cent on China, they will have repercussions, and they come into force. Still, the news flow is dominating the market direction. For now, this session’s high of 22697 is crucial resistance. A close above this will fill the gap. As long as the index trades below 50DMA, it is better to be cautious on the long position. On the downside, a negative close or an inside bar will give a sign of tight consolidation. The last two day’s range will be range for the next one week. Watch the news and earnings.

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