Nifty still in negative territory
Strap: Nifty filled the gap support area and closed at a seven-day low, signaling for further weakness
Dalal Street declined for the third successive session, with the broader market's weakness. Nifty closed at 16416.35 with 153.2 points or 0.92 per cent loss. The Realty, Media, FMCG and IT indices closed with over a 1.5 per cent loss. Nifty Pharma, Fin Nifty and Bank Nifty and Metal indices are down by over one per cent. The Energy and CPSE index was up by one per cent. The Midcap and Smallcap indices are down by over 0.5 per cent. The VIX is up by 1.1 per cent. Market breadth is negative with 1367 declines and 696 advances. About 56 stocks hit new 52-week low and 63 stocks traded in the lower circuit. ONGC and OIL were the top trading counters on Tuesday in value terms.
After a day of wavering, the benchmarks tumbled and filled the 30th May gap. It opened with a gap down and formed a candle similar to the previous day. But the difference is it closed below the opening. As the Nifty filled the gap support area and closed at a seven-day low, it is a signal for further weakness. It also tested the 38.2 per cent retracement level of the current swing. The current swing is more complex than the recent swings, either up or down. There has been a cluster of consolidations in the last 17 trading sessions. The current counter-trend rally has not formed any pattern. As the price structure is typical, and the index moves in a zig-zag manner, it has become very difficult to find decisive trade.
In a directionless market, the risk-reward ratios will not be favourable. By closing below the current base low, Nifty has given a clear breakdown signal. Three successive negative closings are an indication of the exhaustion of a trend. A close below 16370-300 will further confirm the downward move and will test the prior low. Before then, we need to watch the price behaviour, for whether the down move will be a complex move or a sharper decline like the earlier one. Only moving above 16644 and 16840 will give confidence to the bulls. Otherwise, the bears will dominate the market direction.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
