Charts Flag Caution Alert

With IT stocks falling the most, NSE Nifty fell for the seventh straight session. The Nifty declined by 78.90 points, or 0.34 per cent. The Nifty IT was down by 2.32 per cent, followed by Oil and Gas fell by 1.60 per cent. The Media, Healthcare, and Pharma indices declined by over a per cent. The Nifty Metal index is the top gainer with 1.90 per cent. The FMCG, PSU Bank, Auto and Realty indices are up by over a half per cent. The India VIX is up by 2.66 per cent to 15.16. The market breadth is negative as 1,732 declines and 1,100 advances. About 187 stocks hit new 52-week lows, and 157 stocks traded in the lower circuit. National Aluminium, HDFC Bank, Reliance and Zomato were the top trading counters in terms of value.

The Nifty decisively closed below the 200DMA and 200EMA. It formed a strong, bearish belt-hold candle. It is also an engulfing candle with a higher volume than the previous day. The index registered a fresh distribution day. The index tried to recoup the initial losses and entered positive territory during the day, but it failed to sustain the gains. As the index formed an open high candle, which is normally a bearish one, expect more downsides on the cards. The immediate support is at a 50-week average of 23303, which is just 50 points away from session’s low. The index is out of Bollinger bands for the third day, trading 5.66 per cent below the 50DMA. The RSI (28.60) further declined and reached the extreme zone. The MACD histogram shows an increased bearish momentum. Infosys, TCS and Reliance dragged the index the most. Though several stocks recovered from the day’s low, the index failed to close positively. Now, the index must close above session’s high of 23,607 to reverse on the upside. The 200DMA is at 23,565, which is also a resistance now. The 8EMA of 23,813 is the strong resistance. There are several resistances on the upside. On the downside, the immediate support is at 23,303, which is the strongest possible one for now. Expect a dead cat bounce from this level. The downside is limited to another 150 points and the index may try to come out of the oversold condition. Stay cautious on both sides and avoid aggressive position size.

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