MACD line indicates fresh bearish signal
It Index also formed a big bearish engulfing candle and an outside bar with a higher volume than previous day
The equity frontline indices declined sharply from the day’s high, and a most positive opening turned into a negative day. The NSE Nifty declined by 57.30 points or 0.29 per cent and closed at 19,386.70 points. The Nifty IT is the top gainer with 0.61 per cent. The Nifty FMCG, Realty, and Media indices closed with modest gains. The Bank Nifty ended on a flat note. The Pharma, Energy and PSU Bank indices are down by over half per cent. All other sector indices declined with modest losses. The index breadth is negative as 35 stocks closed with losses. 143 stocks hit a new 52-week high, and 64 stocks traded in the upper circuit.
The Nifty opened with over 91 points gap-up and declined by over 215 points from the day’s high. After opening above the 20DMA, the index sharply declined into the slopping channel. It is back to the 50DMA support by the end of the day. It formed a big bearish engulfing candle and an outside bar with a higher volume than the previous day. The selling volumes are above the average. With this, the index has added another distribution day. Now, the distribution day count is at six. If the index closes below the 50DMA of 19,364 points with high volume, it means it will be 19,250 again. In any case, if the index closes below 19,253 points, the market will enter into a confirmed downtrend. Thursday’s move is the biggest in the recent past. Banks and financials mostly supported the bounce from 19,250 points because of short covering.
On Thursday, the Bank Nifty also formed a big bearish candle by declining over 500 points from the day’s high. We suspected Wednesday’s move as many of the bank’s Nifty components rose with declined open interest. On Thursday, the Bank Nifty’s open interest also declined by 4.12 per cent. The Nifty closed below the moving average ribbon on the hourly chart, and the MACD has given a fresh bearish signal. As the index goes back into the sloping channel, we can consider the Wednesday’s breakout was a false one. The MACD line is below the zero line, and the RSI has declined to 46 levels again. As stated earlier, only a decisive move above the 20DMA will be a positive and reverse trend on the upside. But, a decline below 19,364-253 support is negative. Stay away from aggressive positions in this zone.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)