Nifty above upper Bollinger band showing over-extension of trend

The benchmark indices closed flat, but intense selling pressure weakened the broader market on Tuesday. NSE Nifty closed at 19,993.20 with just a 3.15 points decline. The Nifty IT and Pharma indices gained by 1.03 per cent and 0.12 per cent, saving the index from a more considerable decline. Most sector indices declined by 2 -4 per cent, showing a weak presence in the market. The Media index is down by 4.30 per cent. The Nifty Metal, Energy, Realty, PSU Bank, and PSE, CPSE indices are down by 2-4.4 per cent. The India VIX is up by 3.02 per cent, hinting more volatility in the coming days. About 138 stocks hit a new 52-week high and 173 stocks traded in the lower circuit today. IRFC, RVNL, and HDFC Bank were the top trading counters today in terms of value.

Soon after, the index opened and nosedived by 195.70 points in the first hour of trading. This has led to havoc in the Small and Mid-cap space. Several Mid-cap and Small-cap stocks hit a lower circuit today and witnessed a panic selling. The recent thematic stocks like Railway and Defence stock declined sharply, as many of them closed at the lower circuit, and some of them are top trading counters today in terms of value.

The Nifty closed just 3.15 points below the previous day’s close. The IT and Pharma stocks saved the index for the day. It formed an open high candle at a new lifetime high, which is negative for the trend. The volumes were higher in the last six days, but escaped a distribution day. The Nifty is still above the upper Bollinger band, showing an over-extension of the trend. The RSI flattened in the bullish zone. The Nifty traded within the first hour’s range, so the hourly MACD has given a fresh sell signal. The reaction in the broader market shows the market trend is under pressure. Both Mid-cap and Small-cap indices fell sharply by 3.07 per cent and 4.10 per cent, showing the selling pressure in the market. Even the broader market index, Nifty-500, is down by 1.09 per cent. It is time to protect the profit and be on the sidelines until the dust settles down. A move below the 19,914-19,890 zone of support will be negative and can lead to a correction. But a decisive close above the 20,100 needed to continue the rally. As hinted on Monday, the rally was ended in seven days.

(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)