Indicators hinting reversal anytime

The domestic equity markets hit a record high for the seventh consecutive day. The benchmark index, Nifty, closed at 17,377.80 with a 54.20 points gain. The Nifty Realty was the top gainer, with 3.16 per cent. Nifty IT and Media indices are up by 1.50 percent and 1.32 per cent, respectively. The Smallcap-100 index is also up by 1.09 percent. The Nifty Bank, Financial Services, Pharma, FMCG indices closed with less than 0.50 per cent losses. India VIX is up by 3.87 per cent. The overall market breadth is marginally negative as 985 declines and 978 advances. About 130 stocks hit a 52-week high, and 127 stocks traded in the upper circuit.

The frontline index scaled another new high. It opened with a gap up, and the gap is unfilled at the end of the day, though it closed below the opening level. It formed a spinning top candle. A gap down open on Tuesday will signal the bearish move on the downside. It traded below the first hour low and closed below the first hour low. It failed to sustain the momentum. The negative divergence on the hourly chart indicates the market is almost at the top. Unless it moves above the 17,430 points, it may consolidate for some time before taking a decisive direction. As the India VIX crossed 15 and Nifty at the money Implied Volatility crossed 14 levels, expect higher volatility in the market from onwards.

Indicators reached into an overbought condition and hinting the reversal anytime from now. Along with a negative opening, a close below the 17,345 points will also give us a weaker signal. The momentum completely fades today. The MACD histogram on a 75-minute chart has given a sell signal. In any case, the Nifty trades in a positive direction, the upside is limited. It requires counter-trend consolidation above 17,000 level to move further highs. The Nifty moved vertically for the last seven days, which may attract profit booking. A close below 17,345 points, will lead to a retesting of the 17,000 zone. For now, be with a cautious approach.

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