It’s better to avoid taking long positions now
As VIX is also rising, there may be some wild moves on the downside
Trade setup for Wednesday: Things to know before opening bell
Nifty tested 38.2 per cent retracement level of the prior downswing at the opening. It formed an open-high candle and dark cloud cover candle. This evidence shows that the counter-trend has ended
Markets failed to sustain opening gains, and Nifty fell sharply by 177 points from the day’s high. The Nifty closed with 61.30 points or 0.32 per cent decline and closed at 19079.60. The Nifty Realty index is the top gainer with 1.27 per cent, followed by Media with 0.91 per cent. The FMCG, PSU Bank, Midcap, and PSE indices also closed with modest gains. All other indices declined by 0.15 per cent to 0.67 per cent. The India VIX is up by 2.92 per cent and closed at 11.83. About 63 stocks hit a new 52-week high, and 123 stocks traded in the upper circuit. HDFC Bank, ICICI Bank, Reliance, and CDSL were the top trading counters on Tuesday in terms of value.
Nifty tested 38.2 per cent retracement level of the prior downswing at the opening. It formed an open-high candle and dark cloud cover candle. It closed near the day’s low and registered another distribution day, as the volumes were higher than the previous day, and the decline is more than 0.25 per cent. This evidence shows that the counter-trend has ended. If Nifty moves above 19234 the counter-trend consolidation will continue. If the Nifty closes below Tuesday’s low of 19056, it will be negative and can resume the downside move. The index is again back to below 5EMA. The RSI failed to move above the 40 zone.
The index fell below the moving average ribbon on the hourly chart, and the hourly MACD shows a decline in bullish momentum. With this set-up, it will be difficult for bulls to gain a grip on the upside. As the broader market also turned weak, avoid taking a long position. If the index trades below 19100, stay neutral to negative bias. A negative close will lead to new swing lows. As the VIX is also rising, we may have some wild moves on the downside.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
