Charts indicating neutral to positive bias

As there is no technical development on the chart, focus on the previous week’s low of 19,675 points and the 20-week average (19,575) as a key point of support. Only below this support zone may we see a sharp decline

What’s Up

• Nifty trading above all key short and long-term averages
• 8EMA support is at 19,725 level
• A close below this will give initial signal of weakness
• RSI is flat around the 60 zone

The equity prefers to consolidate throughout the week before the event risk i.e. elections in 5 States. The benchmark index traded in just 204.65 points range and finally closed with 62.90 points or 0.32 per cent gain. BSE Sensex gained by 0.27 per cent. The Mid-cap and Small-cap indices were up by 0.57 per cent and 0.39 per cent. On the sectoral front, The Nifty Realty and Metal indices advanced by 1.44 per cent and 1.03 per cent. The PSU Bank and IT indices were down by 1.73 per cent and 0.42 per cent, respectively. The India VIX has declined by 4.21 per cent to 11.33. The market breadth is not so positive. The FIIs purchased net in the last week, with a huge Friday buying worth Rs2,625.21 crore. Overall, the FIIs sold Rs5,101.72 crore, and the DIIs bought Rs9,814.84 crore during this month.

The Nifty has formed an inside bar, trading within last Thursday’s range. While staying in a very narrow range, the Nifty was unsuccessful in moving in a decisive direction. Within the sideways, the index has not closed below the previous day’s low, which is a positive aspect. On Thursday, it formed a shooting star candle and almost got the confirmation for its bearish implications. The index has not breached any support. The 19,875 level acted as a resistance during the last week. As the index is in the tight range, within the support and resistance, we can neither be bearish nor bullish for now.

The exit polls will be out on Thursday evening and may impact the markets. Even before the exit polls, the equities will discount the outcome of the results. So, the monthly expiry may experience a very volatile session, as it happens to be the polling day.

The pattern analysis shows that the Nifty is still in the counter-trend rally and in the rally attempt status. The volumes were lower for the last five days, which is a characteristic of a pattern. If the Nifty trades in the 19,627-875 range, sideways action will continue. For an uptrend, the index must close above 19,875 points to form a higher high, which is a trend reversal signal.

The benchmark index is trading above all key short and long-term averages. The 8EMA support is at 19,725 level. A close below this will give initial signals of weakness. But, to confirm a trend reversal, it must close below the 19,627 points, with added distribution days.

The RSI is flat around the 60 zone. But the negative divergence on the hourly chart will get a confirmation for its bearish implications if it closes below 48. The daily MACD shows a decline in momentum. There is no major price influencing factor seen in the indicators.

The volatility is completely absent, although some intraday spikes were observed. The India VIX is still in the lower range. The Implied Volatility (IV) is also around 10, which is not suitable for shorting the market or taking aggressive leveraged positions. As there is no technical development on the chart, focus on the previous week’s low of 19,675 points and the 20-week average (19,575) as a key point of support. Only below this support zone may we see a sharp decline. Otherwise, the market is in a neutral to positive bias.

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