Avoid Taking Fresh Short Positions

After a 7.35 per cent fall from the all-time high, the index has formed an indecisive candle and is holding the key support level. The Nifty closed at 24,399.40 with 36.10 points or 0.15 per cent. The PSU Bank index is the top gainer with 1.22 per cent. The PSE and CPSE indices gained by 0.64 per cent and 0.59 per cent. Bank Nifty and FinNifty also gained 0.57 per cent and 0.51 per cent, respectively. The FMCG index is down by 2.83 per cent as the HUL dragged it. The Consumption and realty indices are down by 1.34 per cent and 1.13 per cent, respectively. The market breadth is negative as 1,731 declines and 1,031 advances. About 88 stocks hit a new 52-week low, and 101 stocks traded in the lower circuit. Amber, Reliance, HDFC Bank, and PPL Pharma were the top trading counters in terms of value.

The Nifty traded in a tight range on the weekly derivative expiry day. The volumes were also recorded at their lowest in the last eight days. The Index has formed an indecisive Doji candle after a sharp decline. It indicates that the bulls and bears are compromised in the direction. The Nifty halted the fall temporarily and may bounce from here as long as it trades above this session’s low of 24341. The Nifty has met the 50 per cent extension target of the bearish pennant pattern breakdown. The index also holds the 38.2 per cent retracement level of the prior uptrend from the 4th January low. If the index is able to close positively above Thursday’s high of 24480 on Friday, it is a positive technical development. The trading was limited to the first hour’s range, and indecisive tight-range candles were formed on the hourly chart. The Nifty has corrected 7.37 per cent from the recent high of 26277. As stated earlier, the pattern target is 23630, which is exactly a ten per cent correction from the all-time high. There is no major correction after the November 2022 to March 2023 period’s 10.90 per cent decline. For now, the fall on the downside is limited. In any it extends, the Nifty may test 24234. It is not wise to expect more fall from here. Expect the relief rally before Diwali towards 24800 and 25080. The RSI (32.37) is near the oversold zone. The hourly RSI shows a positive divergence, and the Hourly MACD has given a fresh bullish signal. The last hour’s volume is also higher on a positive candle. Avoid taking fresh short positions, and a move above this session’s high of 24480 will be positive, and it can test 24607. On a weekend, it is better not to carry the short positions.

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