Charts indicate further fall

The fall in benchmark indices did not stall because of renewed selling pressure. The early gains in the global market were erased and ended with another day of decline. NSE Nifty closed with a fall of 148.80 points or 0.87 per cent on Wednesday. The Nifty Pharma index, up by 0.85 per cent, is the top gainer today. The Nifty IT and Auto indices closed with 0.24 per cent and 0.06 per cent gains. The PSU Bank index is down by 2.04 per cent. The metal, Energy, Bank Nifty, and Commodity indices declined by over 1.50 per cent. All the other indices were down by 0.3 to one per cent today. The India VIX is up by 2.45 per cent. The market breadth is negative as 1284 declines and 615 advances. About 60 stocks hit a fresh 52-week low, and 76 stocks traded in the lower circuit.

The solid support of 200DMA is finally broken. The Nifty has formed a Doji candle after a 7 per cent decline from the recent top in just 9 trading sessions. The sharper retracement is as expected earlier. The important technical developments on Wednesday are that the Nifty decisively closed below the 200DMA and 38.2 per cent retracement level of the prior trend. The retesting of the double top breakdown was witnessed on Tuesday. The index failed to enter the Monday gap area. Now, the downside targets are open to 16640 and 16296. Some small bounces may be possible, and these bounces are just normal retracements in the downtrend. The price will move in a straight line fashion for a long period, and it has moved in the trends and counter-trends. The index added another distribution day on Wednesday. With this, the total distribution day count went up to six.

As the index is trading below the long-short-term averages with more than five distribution days, it is in the confirmed downtrend. Any upside move has to sustain above the gap area or 17308. We may see several bounces, which may be selling opportunities like Wednesday. Now, the index is trading at six-week low. The Weekly RSI is also declined below the 50 zone. The daily RSI is yet declined below the 30 zone, which indicates some more fall is possible. Tuesday's positive divergence on hourly charts failed to get the confirmations for its implications. But, still, the positive divergence was intact, as it formed another parallel bottom. The rollovers are still below the three and six months average, though they increased compared to Tuesday's rollovers. As the PCR declined to a near neutral zone, the downside may be limited for at least the next two days. As the index is in the bear grip, continue the short positions with a strict trailing stop loss.

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