A decisive close out of range will give trending moves
THE Nifty closed below the key psychological level, 15,700. For the second consecutive day, the market traded in the negative zone. The Nifty lost 38.1 points and closed at 15,689.80. The Sensex was down by 182.75 points. The Nifty Realty and Metals shone with 2.38 per cent 1.99 per cent gains on Friday. Pharma and Media indices were up by 0.64 per cent and 0.94 per cent, respectively. The Banknifty lost 0.57 per cent. IT and Auto indices closed with a 0.3 per cent decline. The market breadth was positive as 1,077 advances and 838 declines were recorded. About 144 stocks hit a new 52-week high, and 127 stocks traded in the upper circuit
The Nifty tested the previous week's low. It formed a Doji candle at the support. After moving in a 98-point range, it was indecisive about moving either side. The Nifty weekly move during the week was in our expected lines at the beginning of this week. It continued to trade within the range. Interestingly, the Nifty tested both resistance and support zones of the ongoing range. In fact, it also formed an inside bar on a weekly chart. The rectangular flat base at the lifetime high is an indication of classical distribution. The Nifty already has 5 distribution days in its account. In simple terms, the Nifty traded in the same zone for the five weeks. Though it is trading in a 260 points zone, it broke the uptrend support line drawn from the April 22 low.
The RSI has also broken the prior two swing lows. The histogram shows an increase in bearish momentum to the five-day high. The negative directional indicator is also higher than the +DMI. There is no relative strength in the trends as it is sideways. Only a decisive close out of the range will give the trending moves. A close below 15,635 will test 15,500 initially, which is also a prior swing low. Then the next level of support placed at 15,240. A decisive close above 15,915 will test the 16,180, initially.
(The author is financial journalist, technical analyst, family fund manager)