MACD Signals Fresh Bearish Tone

The equities continued to consolidate within the previous week and the previous day’s range. NSE Nifty gained 129.55 points or 0.52 per cent and closed at 24,813.45. All sectoral indices were in the green. After two days of decline, the Nifty India Defence index gained by 3.41 per cent. The Realty, Pharma, PSE, and CPSE indices rose by over 1-1.72 per cent. Only the Consumption index is negative by 0.49 per cent. All other indices gained moderately. The India VIX is up by 0.93 per cent to 17.54.The market breadth is positive as 1,753 advances and 1,095 declines. About 50 stocks hit a new 52-week high, and 75 stocks traded in the upper circuit. BEL, Dixon, BSE, HAL, and Cochin Shipyard were the top trading counters in terms of value.

The Nifty has formed an inside bar and a long upper shadow candle. The index is trading within last Thursday’s range for the last four days. The volumes were below the average. As we expected, the consolidation will continue. Last week’s range 24,378-25,116 is crucial support and resistance for the current consolidation. The 20 DMA of 24,509 is critical support for now. The index is back above the 8 EMA. The Bollinger bands are contracting, but still in the uptrend. In any case, the index closes below 20 DMA, the next support is at the prior week’s low of 24,378 points. The index may consolidate within last week’s range for the next 2-3 days. The Weekly and daily RSI are back into the neutral zone. The daily MACD has given a fresh bearish signal. To resume the upside, the index must close above 25,000 with strong volume support. A weekly close above last week’s high will be a strong signal for a bullish bias. For now, it is better to in the sidelines. Focus on the stocks, which have higher relative strength and momentum.

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