As consolidation continues, wavering moves on cards

The buying support from foreign institutional investors supports the markets at every low. Using every dip as a buying opportunity, the sector rotation is also helping the market to sustain at higher levels. Nifty recovered over a hundred points from its day's low. At the end of the day, it closed flat with 9.70 points gain at 13,567.85. Even though overall market breadth is negative, the broader indices also closed with positive gains. The FMCG and PSU Banking sectors were the worst performer with 1.29 per cent and 1.46 per cent decline respectively.

The auto sector continued to close positively. Media, Metal and Financial services indices also closed in positive territory. At one point of time every sectoral index was in negative. The dramatic recovery helped the benchmarks to close in flat to positive. 977 stocks declined and 914 stocks advanced in today's market.

Indecision... Uncertainty,wavering moves were the order of the season. The equity market is in no mood to go down.

Every fall in the morning session was bought into. Long lower shadows indicate that the buying support is at the lower levels. The Nifty took support at 8EMA and closed above the 5EMA. It formed another hanging man. After three days, it closed above the opening level. The momentum completely waned.

For the last one and half months, majority of indicators were in overbought condition and reluctant to come out of it. The volumes are receding. When the market is consolidating or in a pattern formation, the volume generally recedes.

On breakout, volume spurt occurs. As the Nifty is forming hanging man candles consecutively, let us examine the lower time chart. It is oscillating around 20 periods average just less than a percentage above or below to it. Even on the daily chart, the distance from the 20DMA declined to three per cent.

Currently, the Nifty is trading 26.25 per cent above the 200DMA. There are very few instances where Nifty traded in this distance. The Nifty oscillates 7 -8 per cent distance from the 20DMA. It works as a mean level. This could be one reasons for the current consolidation. As mentioned in earlier columns, the upside potential is limited from now. That does not mean that the fall is going to happen. Unless a big bar with a huge distribution volume, and a close below the previous candle low, we cannot assume the bearishness in the market.

The FPI is on buying spree as the Dollar index is falling relentlessly and the market getting support in every dip. For a bearish move, the Nifty must close below the 13,445, and for a decisive breakout, it must close decisively above 13,600. Between these levels, the consolidation continues, and wavering moves will be on the cards.

(Financial journalist, technical analyst, trainer, family fund manager)