Nifty Hovering In Overstretched Condition

The Federal Reserve’s rate cut euphoria was not sustained after the record high. NSE Nifty gained 38.25 points or 0.15 per cent and closed at 25,415.80 poits. The Consumption and FMCG indices were the top gainers, with 0.68 per cent and 0.62 per cent respectively. The FMCG also gained by 0.56 per cent. The PSE index is down by 1.61 per cent, followed by the Oil and Gas index by 1.34 per cent. The Smallcap-100 declined by 1.26 per cent. The India VIX is down by 6.75 per cent to 12.47. The market breadth is extremely negative as 1882 declined and 906 advances. About 107 stocks hit a new 52-week high, and 162 stocks traded in the lower circuit. Indus Tower, IDEA, BajajHFL, and HDFC Bank were the top trading counters on Thursday, in terms of value.

The Rate cut euphoria was limited to the first 30 minutes. With profit booking at a record high, the Nifty declined by 200 points from the day’s high. The Nifty recorded a new high of 25,611.95 points, which met our target. The Nifty has formed a Shooting Star candle with an above-average volume and the highest in the last five days. The high volume selling at the new high is not a good sign. The index is back into the previous four-day range. All last five candles are either bearish or indecisive, as they formed black candles. A majority of the leading stocks breached the supports. The PSU stocks were the worst hit. Many mid and small-cap stocks are now below the 40-week average. As stated earlier, technically, the index is in an overstretched condition. It has to retrace to the 50DMA or the recent low. The immediate support of 8EMA and 20DMA rose to 25,310 and 25,164. In any case, if the Nifty closes below 25,285 points, expect the index to give a reversal signal. The 50DMA is at 24,776 points. This downside target may be achieved sooner or later. The bearish divergences are more clear on RSI and MACD, which may influence or weaken the trend strength. For now, try to take the profits wherever possible. If a stock declines below the 10-week average, do not hesitate to exit.

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