Avoid short positions
Nifty closed almost at the opening level; This confirms the renewed buying interest at the lower levels; On an hourly chart, RSI came out of a squeeze in an oversold zone
NSE Nifty ended its losing streak and closed with a small gain. On a weekly derivatives expiry day, it witnessed high volatility. The Nifty gained by 13.45 points or 0.08 per cent and closed at 16,985.60 points. The Metal index is the top loser with 2.58 per cent, followed by the IT index with 0.69 per cent. The Media is the top gainer with 4.16 per cent. The FMCG, Realty and Energy indices are up by more than a percentage point. All other sectoral indices gained less than a per cent. The market breadth is negative as 1,235 advances and 717 declines. About 276 stocks hit a new 52-week low, and 60 stocks traded in the lower circuit. Motherson, Reliance and HDFC Bank were the top trading counters today, in terms of value.
The benchmark index tried to bounce from the low. It fell below the channel support line. The Nifty has formed a long-legged Doji candle at the bottom. A positive opening and a positive closing will result in a reversal on the upside. This indicates the exhaustion of the bears. The RSI is showing signs of positive divergence. Although the momentum is still bearish, there is a chance of a technical bounce. Today's low is the most important, as it recovered more than 100 points. The fall in many sectoral indices also paused for now.
Only the Metals and IT was weak today. The index breadth is positive, and volumes were higher than in the last six days. As the price did not fall more than 0.25 per cent on higher volume, we can assume that it is not distribution; it might be an accumulation at the lower levels. Most importantly, the Nifty closed almost at the opening level. This confirms the renewed buying interest at the lower levels. On an hourly chart, the RSI came out of a squeeze in an oversold zone. This is the main reason for today's bounce from the lower levels. If today's low of 16850 is protected and a close above 17075 will be positive for the markets. Above 17075, it can test 17213 initially and can retrace 50 per cent of the current downswing, which means it can test the 17325 points. It is better to avoid fresh shorts and stay away from highly leveraged positions. The news flow from the global market is key for moods.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and
Family Fund Manager)