Impulsive trading week on Nifty in offing

AFTER a 300-point intraday move, the Nifty closed almost flat at the end of the day. The Nifty recovered 330 points from the day's low. Finally, Nifty closed with 8.05 points loss at 15,683.35. During the last week, it lost 116 points. The Banknifty declined by 47.4 points. The FMCG and index went up by 0.29 per cent. PSU bank index and Services and Consumption indices were able to close in positive territory. All the other sectoral indices declined. India VIX was down by 3.21 per cent and closed at 14.7975. The market breadth was extremely negative as 1,327 declines and 620 advances were recorded.

Four weeks of winning streak finally matured. The Nifty recovered over 70 per cent of its intraday losses and formed a long lower shadow candle. The recovery is because of the huge short covering in the afternoon session. On Monday, also similar short squeeze formed a long lower shadow candle. The Nifty trade was highly volatile during the week. As we have been suspecting for the last two weeks, the impulsive move has become a reality. The index declined below the 21EMA during the day and closed. It almost tested the cup breakout level. The bearish momentum has picked up, and all the short-term indicators are negative. The MACD histogram shows an increase in the bearish momentum. The negative directional indicators -DMI moved above the +DMI indicates the weakness in the trend. On the weekly chart, the index formed an outside bar, but not an engulfing bar. Nifty rollovers were seen at 17.94 per cent, below the three-month average of 21.24 per cent on the same day. The current price suggests a limited upside. A move below the 15,600 is negative for the market. A weekly close below the 15,450 is a bearish signal. Only, in case Nifty moves above the 15,760, can be considered positive. As the VIX further went down this week, it is better to avoid aggressive positions for now. We can see an impulsive move like Friday in the near future.

(The author is financial journalist, technical analyst, family fund manager)