Avoid fresh positions on both sides

A move above 24,582 or 24,467 will be short-term positive and it can test the 24,760

On monthly expiry day, NSE Nifty recovered from the day’s low as the short-covering rollovers. The Nifty closed with just 7.40 points decline and closed at 24,406.10 points. The Oil and Gas index is the top gainer with 2.22 per cent. The Energy and Auto indices up by 1.27 per cent. The PSE and CPSE indices gained by 1.18 per cent and 0.98 per cent. The Bank Nifty and FinNifty are down by 0.83 per cent and 0.50 per cent. The Realty is down by 0.92 per cent. All other indices gained or lost modestly. The India VIX is up by 7.27 per cent to 12.61. The market breadth is neutral as 1,369 advances and 1,318 declines. About 156 stocks hit a new 52-week high, and 172 stocks traded in the upper circuit. Axis Bank, Tata Motors, HDFC Bank, and Reliance were the top trading counters today in terms of value.

The Nifty recovered opening losses and closed flat on the monthly derivative expiry day. The index has sharply bounced over 215 points from the day’s low. It is able to close above the 20DMA. For the third consecutive day, the index recovered from the below 20DMA. On Thursday, the index closed above the opening level, forming a bullish candle. The volumes were recorded above average for the third straight day and the fifth day in the last six days.

Normally, the above-average volume at the new high and the price forming a bearish pattern is a sign of distribution. On a weekly chart, the index is below the shooting star candle, almost confirming the reversal. But as the index closed at the day’s high, it is a positive. This positive sign is because of derivative trades. L&T, Tata Motors, and HDFC banks contributed about 80 points to the Nifty today. The advance-decline ratio is neutral at 1:1. The RSI closed on the 60-line support. The MACD histogram shows an increase in the bearish momentum. As the index closed flat to negative, the Elder impulse system formed another bearish candle. For the last two days, the index has been trading within the budget day move. For a directional bias, it has to come out of this range. A move above 24,582 or the 8 EMA of 24,467 will be short-term positive and it can test the 24,760. In any case, the Nifty closes at the current level or below 24,500 will be negative and can retest the prior breakout level of the 24,000 zone. The weekly closing is very important now to get the confirmation for reversal. The Global markets have also weakened with big declines in recent times. For now, it is better to avoid the fresh positions on both sides. Protect the existing positions with strict stop losses.

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