Avoid building fresh, long positions

As the index moved below the 10-week average on an intraday basis, the index is almost on the edge of breaking the key support. If the Nifty closes below the previous low of 22,493 and the 10-week average of 21,957 on a weekly closing basis, it will signal the confirmed reversal signals

Extremely Negative Mkt Breadth

• 2,437 stocks declined
• India VIX is up by 5.83
• 496 stocks in lower circuit
• Only 180 stocks closed positive
• 222 stocks hit a new 52-week low

The equities nosedived to below key supports. Only ITC has contributed 50.78 points on Wednesday. Otherwise, the fall would have been much more severe. NSE Nifty declined sharply by 338 points or 1.51 per cent and closed at 21,997.70 points. With the ITC gain, only the FMCG index is up by 0.05 per cent. The CPSE, and PSE indices were the worst hits with 6.86 per cent and 6.65 per cent. The Metal, Media, Energy, Realty, and Smallcap-100 indices were declined by over five per cent. The Midcap and PSU Bank indices closed over four per cent lower.

All other sectoral indices succumbed to over one per cent. The India VIX is up by 5.83 per cent. The market breadth is extremely negative as there are only 180 stocks closed positive, and 2,437 stocks declined. Interestingly 496 stocks traded in the lower circuit, and 222 stocks hit a new 52-week low. HDFC Bank, ITC, JioFin, and ICICI Bank were the top trading counters on Wednesday, in terms of value.

Across-the-board selling pressure, with extreme negative breadth, caused the benchmark index, Nifty, to close below the previous week’s low. It decisively closed below the 20DMA and almost tested the 50DMA. The highest volume after February 8 was recorded on Wednesday, and the Nifty registered a fresh distribution day. The index also broke the rising wedge pattern support. The Wedge base is about 978 points, which is a probable decline in the near future. As the index moved below the 10-week average on an intraday basis, the index is almost on the edge of breaking the key support.

If the Nifty closes below the previous low of 22,493 and the 10-week average of 21,957 on a weekly closing basis, it will signal the confirmed reversal signals. The rising wedge pattern breakdown target is almost at a prior major of 21,137 points. All leading sector indices’ price structure is damaged on Wednesday; particularly PSE, CPSE, Mid-cap and Small-cap indices were closed below the critical support. Avoid building fresh, long positions and adding them to the portfolio. For the next two months, the market will be in counter-trend consolidation, due to event risk.

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