A few intraday sharp bounces expected

The equities traded nervous as the monthly derivative expiry is nearing. The Nifty declined by 90.65 points or 0.41 per cent and closed at 22122.05. The Nifty IT index is the top loser with 1.17 per cent, followed by the Metal index with 0.94 per cent. The Pharma and Media indices are down by 0.48 per cent and 0.37 per cent, respectively. The Energy index is the top gainer with 0.50 per cent.

Auto, infra, realty and PSE indices gained by 0.04 per cent to 0.11 per cent. The India VIX is up by 4.19 per cent to 15.60. The market breadth is negative as 1552 declines and 1045 advances. About 190 stocks hit a new 52-week high, and 131 stocks traded in the upper circuit. JioFin, HDFC Bank, L&T, and Alkem Labs were the top trading counters on Monday in terms of value.

The Nifty has formed a bearish candle and closed just below the prior breakout level. The last six days of price action are lined to the breakouts zone. It took support at 8EMA on Monday. The volume was lower on Monday, too. As the derivative expiry is nearing, the price action is not giving any conviction. By closing below the previous day’s low, the index has given weaker signals. It also closed below the prior breakout level.

The RSI declined further, and the negative divergence is almost getting confirmation for its implications. The momentum is waning. On the hourly chart, the index closed in the moving average ribbon. For the next three days, the 22000-22300 zone is crucial for a directional bias. The rise in open interest by over 16 per cent on a declining day is an indication of short built up. The derivative data also suggest 22000-22300 are the support and resistance, where the open interest is very high. It is better to stay negative to neutral bias for Tuesday. A few intraday sharp bounces are expected.

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