Nifty enters counter-trend consolidation

The equities traded sideways, and most of the activity was stock-specific. NSE Nifty gained by just 9.50 points and closed at 19,398.50pts. The FinNifty and Bank Nifty were losers on Wednesday with 0.82 per cent and 0.33 per cent. The PSU banks saved the day again. The FMCG and the Auto indices were the top gainers, with 1.82 per cent, and 1.64 per cent, respectively. All other sectoral indices gained by 0.27 per cent 0.85 per cent. The market breadth turned positive as the advance-decline ratio is at 1.58. About 134 stocks hit a new 52-week high, and 57 stocks traded in the upper circuit. HDFC twins, Bajaj Finance, and ICICI Bank were the top trading counters on Wednesday in terms of value. On Wednesday 56 bulk deals and 35 block deals occurred.

The Nifty formed another Hanging Man candle. It traded within the previous day’s range and formed an inside bar. Volumes were below the average for the last three days. The Nifty took support at monthly VWAP. It is still out of the Bollinger bands. As we expected on Tuesday, the index is now entered into a counter-trend consolidation. As per the inside bar rule, the previous day’s high of 19434.15pts and low of 19,300pts will act as crucial resistance and support. Only out of this range we can see a trending move. On the downside, Wednesday’s low of 19,339pts will also act as a support. The index closed below the open and formed a bearish candle. The RSI (76.32) is still in the extremely overbought zone. The positive directional indicator +DMI is also declining from the high. As stated earlier, there is no weakness in the price, but showing an exhaustion of a trend. The index traded in the first-hour range. The derivatives data shows longs outnumbered shorts. The Nifty futures Open Interest is up by 3.19 per cent. The weekly expiry will be highly volatile as the VIX and IVs were slightly gained. The derivatives data suggests that the 19,300-500 zone is the key for today’s expiry. We may see wild swings during the day. Stay on the sidelines until the directional bias is established.

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