Charts indicate weakness in market
NSE Nifty filled the previous day gap and closed below Wednesday’s low. It sustained only one above the 20DMA. The flattened 20DMA again turned downside. The Nifty took support at 50DMA for the day after a sharp dip below it on an Intraday basis
The domestic benchmark indices tumbled with a profit booking after five days of the rally. The NSE Nifty declined by 219.80 points or 1.24 per cent and closed at 17560.20. The only Auto index closed with 0.44 per cent. The IT and the Realty indices were the worst performers, with a 2.05 per cent and 1.74 per cent decline. A majority of the sectoral indices closed with 0.5 - 1.3 per cent down.
The India VIX is down by 2.73 per cent. The market breadth is negative as 1114 declines and 942 advances. About 80 stocks hit a new 52-week high, and 156 stocks traded in the upper circuit. Dhani, SBI, HDFC has recorded the highest turnover on Thursday.
Our suspicion waning momentum proved right. The Nifty filled the previous day gap and closed below Wednesday's low. It sustained only one above the 20DMA. The flattened 20DMA again turned downside. The Nifty took support at 50DMA for the day after a sharp dip below it on an Intraday basis. It also tested the 23.6 per cent retracement level and closed just below, which is the first sign of weakness.
The index faced resistance at 61.8 per cent retracement too. We also stated that the declines are sharper also proved right. In the last three days, the Nifty opened with a positive gap and traded mostly in the sideways. But, today, the opening with a small negative bias, but the decline is consistent and sharp in the second half of the day.
The breadth is negative, and all the sector indices ended in the red zone barring the auto sector index. The Nifty future volume recorded above the average volumes and the open interest highest in the last four days. On a declining day, the volume and Open Interest increase indicate that the fresh short positions were added. Interestingly, the Nifty future closed with 53 points.
We assume that the downswing has begun and only above 17772 does it resume the uptrend. At the same time, a close below 50DMA (17555) will continue the downswing.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)