Avoid fresh long positions for now

The equities collapsed on a broader market selling pressure. The benchmark and all the sectoral indices were closed negatively. NSE Nifty declined by 197.80 points or 0.91 per cent and closed at 21,513 points. The FMCG and the Bank Nifty were the top losers, with 1.47 per cent and 1.72 per cent, respectively. The PSU Bank index was down by 2.52 per cent. The Metal index is also down by 1.59 per cent. All other sectoral indices were down by 0.21 per cent to over one per cent. The market breadth is negative as 1,574 declines and 1,014 advances. 217 stocks hit a new 52-week high, and 172 stocks traded in the upper circuit. Kotak Bank, Trident, GMR Infra and Olectra were the top trading counters today in terms of value.

The Nifty has formed a big engulfing candle and fell below the previous week’s low. It formed a most bearish candle after 20th December. By closing below the Doji candle low, the index has given confirmed weaker signals. The index has escaped the distribution day as the volume was lower than the previous days. The selling pressure was across the sectors. It closed below the 8EMA support. The next nearest support is at 20DMA of 21404. The MACD shows an increased bearish momentum. The RSI has declined below the prior swings. It is near the neutral zone. A decline below 60 means the index has lost its strength in the trend. The KST has given a bearish signal in an extreme zone. The trend strength indicator ADX and the +DMI are declining. Importantly, the India VIX rose by 7.40 per cent and back to 13.55 levels. As we expected, the volatility has increased. Technically, we can assume that Monday’s high is the short-term top. Only a close above 21,764 will resume, and the uptrend will form new highs.

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