20DMA support placed at 17,711pts
Nifty has made a short-term top at 18,350 points. Avoid fresh long positions now, and keep the prior day high as stop loss for the short positions
image for illustrative purpose
The equity market slid for the second consecutive day and closed below the psychological 18000 level. The Nifty ended at 17938.40 with 174.65 points or 0.96 per cent loss.
The Nifty IT is the top loser with a 2.13 per cent decline. The Fin Nifty lost 1.08 per cent, followed by FMCG lost 1.06 per cent. The PSU Bank index gained by 2.21 per cent, but the Bank Nifty declined by 0.44 per cent. The Volatility increased as VIX touched 18.44 during the day and settled at 17.81. The market breadth is negative, and 1219 declines and 899 advances. About 102 stocks hit a new 52 week high, and 147 stocks traded in the lower circuit.
As expected, the Nifty declined another percentage point with high volume and tested the 23.6 per cent retracement level. The two days decline is the sharpest in the current upswing. The decline with a negative breadth is a bad omen for the market.
In the last, the Nifty gained 1486 points in 17 trading sessions till 14th January 2021. Then in the next 10 trading sessions, it lost 983 points till 29th January. This year, the Nifty gained 1584 points in 17 trading sessions till 14th January 2022. Currently it lost 333 points in four trading sessions. Let us wait and watch for history to repeat.
With the two days of decline, the RSI has developed a serious negative divergence and closed below the prior swing low. The MACD line declined, and the histogram fell to near zero line.
The negative momentum indicator -DMI moved above the ADX and was about to cross the +DMI too. These are the indications that bulls are losing control of the trend. In fact, after 21st December, the Elder impulse system has given a bearish signal. Tuesday's Bearish Engulfing got the confirmation as the Nifty closed below the engulfing candle low. The Nifty also erased all six-day gains in just two days.
These are the signs that Nifty has made a short-term top at 18350. Avoid fresh long positions now, and keep the prior day high as stop loss for the short positions. On the downside, the 20DMA support is placed at 17711, and the 38.2 per cent retracement level is at 17609. These are key levels to watch for the next two days.
