Rising ADX points to bearish bias
The intraday bounce of 100 points was not sustained, after which selling pressure intensified; volatility will increase further from now and there is no change in direction as of now
As the event risk was over, the equity markets resumed their directional bias. The NSE Nifty declined by 207 points or 1.21 per cent and closed at 16887.35. Nifty Pharma is the only gainer with 1.13 per cent. The Nifty Metal, FMCG and Auto were the top decliners with 3.02 per cent, 2.09 per cent and 2.03 per cent, respectively. The other sector indices declined from 0.81 per cent to 2 per cent. The India VIX is advanced by 7 per cent to 21.36. The Market breadth is negative as 1323 declines and 592 declines. About 51 stocks hit a new 52-week high, and 85 stocks traded in the upper circuit.
The Nifty declined over 200 points and erased most of Friday's gains. It formed a dark cloud cover candle, which is bearish. As we suspected, Friday's bounce is just event-based. The index declined below the 200DMA again. The intraday bounce of 100 points was not sustained. After the bounce, the selling pressure intensified. On an hourly chart, the index closed below the moving average ribbon, and the MACD line is below the zero line. The MACD is about to give a fresh sell signal. The daily RSI once again declined below the 40 zone.
As the bear domination renewed, the trend strength index ADX rose to over 24.1, which signifies the strong downtrend in place. The Nifty failed to move into the 26th September gap area. Now, this gap area zone of 17291-196 will act as a crucial resistance. Only by filling the gap the Nifty will test 17500 on the upside. As the Nifty also formed an inside bar, Friday's low of 16747 will act as a support for now.
A close below 16747 will test the immediate support at 16639, and later it can fall up to 16296. The volatility will increase further from now. There is no change in direction as of now. The market is waiting for very strong positive triggers of bullish strength. There are negative news flows currently in global markets influencing equities. It is better to avoid highly leveraged positions.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
