RSI Not Showing Any Momentum

After an impulsive week, the equities traded on a dull note. NSE Nifty traded in a 140-point range. The Nifty declined by 74.35 points, or 0.30 per cent. The Realty index is the top gainer with 2.26 per cent. The PSU Bank and Microcap indices are up by over one per cent. Small-cap and Pharma indices rose by 0.50 per cent. On the flip side, the IT and Defence sector indices are down by 1.30 per cent and 1.26 per cent, respectively. The Media is down by 0.59 per cent. The India VIX is up by 4.86 per cent to 17.35. The market breadth is positive as 1,842 advances and 1,074 declines. Above 67 stocks hit a new 53-week high, and 175 stocks traded in the upper circuit. Cochin Shipyard, Mazdock, HAL, GRSE, and BEL were the top trading counters, in terms of value. In a muted trading day, the volumes recorded were just half of the previous day. The Nifty formed a lower low below the previous day’s low. The inside price action for the last two did not provide any directional bias. As stated earlier, the consolidation may continue for another 3-5 days and may test the 8EMA, which is at 24,756, the nearest support. As the Bollinger bands contract, expect mean reversion towards the 20DMA of 24,450 if the profit booking continues for more than 3-5 days. The RSI has been flat and hovering around the 60 zone for the last one month. Even though the index rallied impulsively, the RSI has not shown any momentum. The MACD also formed a parallel high, and the histogram shows a muted momentum. Any sharp bounce above the prior session’s high will resume the upside move. The 25,300-350 is the crucial resistance. As the earnings season is almost ended, expect the stock-specific activity to reduce. The broader market breadth is positive. Focus on high relative strength stocks.

(The author is partner, Wealocity Analytics, Sebi-registered research analyst, chief mentor, Indus School of Technical Analysis, financial journalist, technical analyst and trainer)