Market Likely To Enter Time Correction

With the broader market selling pressure and intensified profit booking, the equity indices closed negatively. The Nifty declined by 261.55 points or 1.05 per cent. All the sectoral indices closed in the red. The Nifty India defence index is the top loser with 2.38 per cent, followed by Auto with 2.17 per cent. The Nifty Junior, Consumption, Midcap indices are down by over 1.5 per cent. All other indices declined 0.5 to 1.5 per cent. The India VIX is up by 0.17 per cent to 17.38. The market breadth is negative as 1974 declines, and 915 advances. About 48 stocks hit a 52-week high, and 117 stocks traded in the upper circuit. Cochin Shipyard. BSE, BEL, HDFC Bank, and Mazdock were the top trading counters in terms of value.

The Nifty erased last Thursday’s gains and formed a strong bearish candle. It registered a distribution day, as the volumes were higher on a 0.93 per cent decline day. It violated the 8 EMA support and closed decisively below it. The 20 DMA support is just 0.88 per cent away at 24477. The Nifty declined by 446 points or 1.78 per cent from the Thursday high. Importantly, the index is below the prior major high of 24857. With this, last week’s breakout failed for now. As profit booking or selling pressure was widespread, expect a period of time correction. Do not expect the market to move higher, at least for the next one or two weeks. The index has already retraced 38.2 per cent of the previous week’s move. The 23.6 per cent retracement level of the recent 5.51 per cent impulse swing is at 24320, which is the crucial support for the directional change. The 50-week average support is at 24060. A close below this level, the index may test 23400. So, as long as the index trades below 24858, stay away from building new long positions.

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