Better To Avoid Fresh Positions

Nifty has to hold the 200EMA (23,502) support, otherwise, it will witness the next round of sharp sell-off. The 200DMA (23,456) is the last hope for the market. If it fails to hold this support zone, the index will test the 22,860 level sooner or later

The domestic stock market witnessed across-the-board selling pressure. The benchmark indices declined by over two per cent intraday. The market was nervous ahead of the US Presidential elections and Fed meeting. NSE Nifty finally declined by 309.00 points or 1.27 per cent and closed at 24,995.35. All sectoral indices ended with negative bias. The Nifty Energy and Oil and Gas indices declined by 2.60 per cent and 2.48 per cent, respectively. PSE, Media, Infra and CPSE indices are down by over two per cent. All other sector and thematic indices were down by up to two per cent. The India VIX is up by 4.94 per cent to 16.68. The market breadth is extremely negative as 2,144 declines and 722 advances. About 75 stocks hit a new 52-week high, and 134 stocks traded in the upper circuit. Waree Engineers, Afcons, Reliance and HDFC Bank were the top trading counters in terms of value.

The Nifty violated the August low and hit its lowest level after August 7. It also broke the five-day consolidation and met the 89 per cent Head and Shoulders pattern breakdown target. The immediate support is at 150EMA at 23,978 points, also broken on an intraday basis. It also broke the prior major low of 23,893 points. It is important to know that the 200EMA, which has acted as support several times in the past, is currently at 24,502 and will be tested sooner or later. Forecasting more than this level at the current juncture is not wise. With the session’s decline, the Nifty is down by 9.37 per cent from its all-time high. With this, the Nifty will complete its Category-1 correction (10-13%). The Nifty has to hold the 200EMA support. Otherwise, the market will witness the next round of sharp sell-off. The 200EMA (23,502) and the 200DMA (23,456) are the last hope for the market. In any case, if the Nifty fails to hold this support zone, the index will test the 22,860 level sooner or later. The 50DMA is clearly in the downtrend. The Bollinger bands slope is also not good for the market. The MACD is bearish and shows an increased bearish momentum. The RSI is now at 31.58 and may enter into an oversold condition below 30. However, it can remain in oversold condition for some period. For now, it is better to avoid fresh purchases, as the broader market is extremely weak. There are very limited opportunities in the market.

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