Nifty's exhaustion sign shows bearish mode

NSE Nifty tumbled with an intense profit booking as the monthly derivatives expiry is nearing. The Nifty closed at 16483.85, with a decline of 147.15 points or 0.88 per cent. Only the Media index is up by 0.86 per cent. The fall was led by the IT index with a 2.83 per cent decline. Pharma, FMCG, Auto, and Realty indices are down by over a per cent. The other indices lower by half a per cent. The market breadth is negative as 1415 declines and 455 advances. The VIX is closed at 18.17 with a 2.77 per cent rise. About 30 stocks hit a new 52-week high, and 76 stocks traded in the upper circuit. Zomato, BajajFinsv and Reliance were the top trading counters today in terms of value.

As we suspected on Monday, the index retraced below the gap area support. The index took support at 8EMA and closed at five day low. The big and strong bearish belt holding the candle shows the strengthening bears. It also closed below the 20-week moving average decisively after last week's positive closing. As we expected, a sharper move will attract the counter-trend consolidation. The last two days of exhaustion signs got bearish confirmations with Tuesday's fall.

As it already tested the gap area, the next level of immediate support is at 16187. Before that, it may hold for some period at 16382. For a bullish continuation, it has to hold above 16382 and close above the 16636 level. Between these levels, the index may further consolidate. Heiken Ashi candle has formed a bearish bar too. By observing the last two days of price action, the Nifty may form an inside in the current week. The Nifty rollovers were still below the three and six months average. The index breadth and broader market breadth show inherent weakness in the system. The monthly derivatives expiry is in just two days, and the volatility may increase further. The India VIX has been rising for the last two days. For now, avoid long positions.

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