Fag-end profit booking takes toll on initial gains
After a big move in the market, this kind of fall looks abnormal; traders square off most positions
Shifty Nifty
♦ Closes with 0.59% gain at 19638.30
♦ Erases all losses of previous day
♦ Nifty IT index is down by 0.30%
♦ Nifty Pharma index is the top gainer
♦ Implied volatility decline significantly
Last-hour selling pressure dampened the strong recovery efforts. Finally, Nifty closed with 114.75 points or 0.59 per cent gain and closed at 19638.30. Only the Nifty IT index is down by 0.30 per cent. All other sector indices were closed in positive territory.
The Nifty Pharma index is the top gainer with 2.66 per cent. The Media, PSE, Metal, PSU Bank, and CPSE indices gained over 1.5 per cent. All other sectoral indices recorded decent gains. The market breadth turned positive. About 70 stocks hit a new 52-week high, and 65 stocks traded in the upper circuit. HDFC Bank, MCX, and Reliance were the top trading counters in terms of value on Friday.
The Nifty erased almost all the losses of the previous day. But, last hour’s profit booking destroyed the initial gains. It formed an inside bar and a long upper shadow candle. Importantly, the index has given up 50 per cent of the day’s gain. It is back above the 50DMA. The India VIX declined by 10.68 per cent, returning to the 11.45 level. As you know, it was up by exactly 10.68 per cent on Thursday.
The Implied Volatility also declined significantly. After a big move in the market, this kind of collapse in the market looks abnormal. As the long weekend was in place, traders squared off most of the positions. This is the reason for the last-hour decline. The index has formed an inside bar, so it comes out of the range for a directional bias.
The index moved sideways for 1-2 days before registering a breakout. Thursday’s range, 19492-766, is crucial support and resistance for now. The range breakout will decide whether the market will reverse or resume the trend. There is no change in the directional bias for now. As long as it trades below 19766, it will be negative. A move above 20DMA, which is also at a similar level of 19760, will be positive for the market. Till then, stay on neutral bearish bias.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
