Take short positions below 15,670 points

The NSE Nifty declined for a third successive day. It fell by 118 points from the day's high. The index breadth is negative. Barring IT, all the sectoral indices were down. The Nifty settled at 15,721.50 level with a decline of 26.95 points. The IT index up by 0.63 per cent. The Midcap-100 and Smallcap-100 indices outperformed with 0.26 per cent and 0.22 per cent. All the sectoral indices declined by about half a per cent. The overall market breadth is 1:1 as 968 declines and 960 advances. About 209 stocks hit new 52 week high and 189 stocks traded in the upper circuit.

Many days after, the NSE Nifty registered a third consecutive negative day. For the second successive day, it closed below the previous day's low. All the early gains once again erased. VIX closed at a lowest level after January 3, 2020. The index breadth is negative. It closed below the 20DMA after May 4. The whole June month, the Nifty moved in just over 200 points the majority of the time. After moving 952 points during May, the Nifty moved just 138 points in June. As a result, The Bollinger Bands contracted to a minimal level. As it closed below the 20DMA, expect a volatile move on the downside in the near future. The prior swing low is at 15,450 points and the 50DMA is at 15,247 level. The Nifty may test these levels in very soon. As the index traded in sideways, the breakdown will be with a sharper move. Unless the Nifty moves above previous day high of 15,840 points, better to avoid the long positions now. The RSI is moving in a downward channel and below the prior swings. The momentum increased on the bearish side. The negative directional indicator -DMI, is dominating as it moves above the +DMI and ADX. The daily ADX (13.37) shows the weaker trend strength. A fall in price and a rise in ADX line will be the first danger signal for the mart. As weekly expiry in place, the volatility will be an order of the day. Option premiums are not attractive at the current level. The Open Interest increased by 4.09 per cent on a price decline. An addition of a distribution day in the next two days will be a reversal sign. Avoid long positions; wait to take aggressive short positions below 15,670 points.

(The author is financial journalist, technical analyst, family fund manager)