Market breadth turns negative

The IT sector stocks resumed the fall after one day pause. The sector is leading the fall, and all the heavyweight IT stocks have the potential for further decline. The benchmark index, Nifty down by 41.40 points or 0.23 per cent. The Nifty IT index declined by 1.77 per cent, followed media index with a 1.71 per cent decline. The only Metal index is able to close with a 0.53 per cent gain. The Nifty Pharma, Oil and Gas indices also closed with small gains. The India VIX is up by 0.64 per cent to 12.15. The Advance-Decline ratio is at 0.91. About 46 stocks hit a new 52-week high, and 72 stocks traded in the upper circuit. ICICI Bank, HDFC Bank, and Axis Bank were the top trading counters today in terms of value.

The Nifty declined for the third straight day and formed a lower low and lower high bar. But it is still in the Monday range. The index has taken support for the second day on 200DMA in the last three days. A decline below 17,587-17,574 support and a negative close for the fourth consecutive day will indicate the reversal of the nine-day impulsive rally.

Importantly, the Nifty closed below the 23.6 per cent retracement level of the prior upswing. On an hourly chart, the index declined below the moving average ribbon, along with the MACD line below the zero line. The hourly RSI sustained below its 20 periods average. Today's decline with higher volume than the previous day is another negative fact. The market breadth turned negative. The only Metal index gained a little over half a per cent. This indicates that none of the sectors are in a position to lead the market. The day's range is shrunk to just 86 points. If the index closes below 17574, it may test the 50DMA of 17508 in a faster manner. A close above 17667 is positive, and the consolidation will continue within the Monday range for another one or two days.

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