Charts Indicate Increased Volatility In Consolidation Zone

The equities traded volatile, and the benchmark index closed flat to negative for the second day. The Nifty declined by 12.40 points and closed at 22,932.90. The broader market indices, Mid-cap, Small-cap, and Micro-cap indices gained over 1.5 per cent. The Realty, Media, PSU Bank, Metal, PSE, Energy, and Private Bank indices gained over a per cent. The IT index declined by 1.30 per cent. Healthcare and Pharma indices are down by 0.71 per cent and 0.78 per cent, respectively. The India VIX is down by 1.56 per cent to 15.42. The market breadth is positive after a long time, as 2,145 advances and 716 declines. About 361 stocks hit a new 52-week low, and 167 stocks traded in the upper circuit. BSE, RVNL, Mazdock, TCS, and Hexaware Technologies were the top trading counters in terms of value.

It has been a highly volatile session, led by banks and financials. The Nifty ended negative even after being supported by these two sectors. The IT and Pharma stocks dragged the market. For the last three days, the volumes were almost similar and much below the average. The Nifty has formed a long upper shadow candle, a shooting star, almost closed at the previous lowest closing. It tested 22,814 again. The index is consolidating in the range for the past six days. It recorded long shadow candles on either side, showing uncertainty. It is also reflected in the price action today.

The RSI is still below the 30 zone and flattened. On the hourly chart, the RSI failed to move above the 60 zone to register a base breakout. As the index is consolidating in a zone with increased volatility, it is better to wait till the directional bias emerges. A decisive close below 22,800 will result in a sharp decline. For a decisive upside breakout, the Nifty must close above 23,227, which is 20DMA. Within this 400-point zone, volatility will be higher, and either side swings will not sustain for long. Apply neutral strategies in this range.

(The author is partner, Wealocity Analytics, Sebi-registered research analyst, chief mentor, Indus School of Technical Analysis, financial journalist, technical analyst and trainer)