Avoid taking long positions in Nifty

The weak global markets and the fall in pharma stocks have pulled down the frontline indices. The NSE Nifty declined to be 78 points or 0.49 per cent. With weak Q1 results, the index stock Dr Reddy's sharply down by 1.49 per cent. The Cipla, Divi's Labs and Sunpharma also declined over two per cent. With this, the Nifty pharma index is down by 4.33 per cent. Barring the Metal index, all the sectoral indices declined by half a per cent. The overall market breadth is negative as 1,108 declines and 832 advances. About 190 stocks hit the new 52-week high and 179 stocks traded in the upper circuit.

After retesting the resistance for two consecutive days, the benchmark index fell sharply and closed below the two-day low. The decline in pharma stocks is one reason for Tuesday's market fall. The closed below the trend line support and 20DMA. As we mentioned earlier, the index is oscillating around the 20DMA during the current consolidation. The Nifty closed below Friday's Doji candle and confirmed the weakness in the index. The Nifty is just another 0.6 per cent distant from the 50DMA (15746), which coincides with the bottom support (15635) of the consolidation zone. We are just another 100 points away from this important support. The Nifty's indecisive about the trending move. The longer the consolidation, the more volatile move will come. The rise in the VIX towards the near 15 zone is the first sign of it. The RSI is at 50 and making lower highs. The MACD line is near zero line. A fall below 15,635 points will, and these two indicators enter the bearish zone, means the market is poised for a decent correction. Unless the Nifty moves above 15,900 decisively, it may test the 15,431 with a high probability. Currently, avoid long positions in the index.

(The author is financial journalist, technical analyst, family fund manager)