MACD signals increased bearish momentum
Better to stay with more cash and on the sidelines; Volumes declining for last 3 days and below average
NSE Nifty ended flat exactly at the previous day’s close as it ended at 22,302.50 points. This is an uncommon occurrence. The CPSE and PSE indices were the top gainers, with 2.39 per cent and 1.86 per cent, respectively. The Oil and Gas, Auto, Energy, and Metal indices gained over 1.5 per cent. The private-sector bank index is the top loser at 0.81 percent. Bank Nifty is down by 0.55 per cent. The Nifty IT and FinNifty declined by 0.41 per cent and 0.31 per cent. The market breadth is positive as 1,509 advances and 1,082 declines. About 72 stocks hit a new 52-week high, and 106 stocks traded in the upper circuit. HDFC Bank, REC, SBI, and ICICI Bank were the top trading counters on Wednesday in terms of value.
Nifty made another lower low, and the daily range was shrunk to 183 points. It traded below the 50DMA most of the day and finally closed just 3 points below it. The most interesting point is that the Nifty closed at an exact level for the last two days. In other words, the index closed at identical levels which is very rare. The current price pattern looks like a double top. The bearish divergence in RSI and MACD are clearly visible. The MACD shows an increased bearish momentum. After rejections twice at the 60 zone, the RSI is now at 47. In any case if it declines below 40, the strongest bearish signals will emerge.
Most importantly, the index is now below the 20DMA and 50DMA. The volumes were declining for the last three days, and below average. The index can test the prior swing low at 21,777 points, if it registers another negative day. Before that, the channel support and demand line is at the 21,850-21,900 zone. As the VIX reached above 17 levels, almost doubling in just ten days, it is a high alert for all trades. For an upside, the Nifty must move above the 20DMA or 22,433, with volume support. For now, it is better to stay with more cash and on the sidelines. More volatile days will hurt the positions of both sides.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
