Bears on the prowl

The market nosedived after a positive opening. The fall was led by the Metals. The benchmark index, Nifty, declined by 350.50 points or 2.22 per cent. In fact, it declined 550 points from the opening high. The Nifty Metal index is down by 5.38 per cent. The Realty index PSE indices declined by three per cent. The Bank Nifty, Fin Nifty, IT, Auto and the Energy indices slide by over two per cent. FMCG index is outperformed by declining just 0.52 per cent. The market breadth is extremely negative as 1814 declines and only 288 advances. About 267 stocks hit a new 52-week low, and 140 stocks traded in the lower circuit. Reliance, Bajaj Finance, and Tata Steel were the top trading counters on Thursday on value terms. The Nifty decisively declined below the prior lows of 15671 and 15735.

It also came out of the last two days of indecisiveness. The opening euphoria fizzled out within minutes of opening. The Nifty has formed a big Engulfing bar. The importance of Thursday move is that the index made a new low. In the last five trading sessions, it declined by 1065 points or 6.46 per cent, which is a massive fall. It also made a new 52-week low. It declined over 17.5 per cent from the October 2021 high. As we mentioned earlier, this fall is going to be a ferocious one. We also mentioned that the next three weeks are going to be crucial for the market. The bears will dominate with massive selling. At the same time, any gap opening will not sustain, like Thursday. Every rally will be sold into. Our target of 15323 is almost achieved. The RSI enters into the oversold or a strong bearish zone.

The rising ADX (20.48) shows the strengthening bears. The -DMI is almost at the previous high is an indication that bulls have lost their grip on the market. The Elder impulse system has formed a strong bearish bar on a weekly time frame. About 70 per cent of the Nifty500 stocks declined below the 200DMA. And many of them are trading over 30 per cent lower from their All-Time High (ATH). However, if the 15323 level is protected, the index may bounce towards the 15900-16000 level. Look at the positive divergences on a lower time frame at this level to take long positions. Probably, the Nifty may form an inside bar on Friday after a massive decline. But, a weekly close below the 15323, will be a big negative for the market. Thursday's high 15863 will act as crucial resistance for now.

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