Charts Signal Indecisive Mode

Weekly volumes were highest after the third week of July. This shows that the accumulation happened after 9 weeks of distribution. Most of the volumes were recorded on Monday. Friday’s rise did not attract much volume

The equities traded volatile last week and closed positive at the end of the week. The benchmark index, Nifty, is up by 0.94 per cent, and BSE Sensex rose by 0.87 per cent. The broader market indices outperformed the benchmark, as Nifty Midcap-100 up by 2.50 per cent and the Smallcap-100 index advanced by 5.04 per cent. On the sectoral front, the Auto and IT indices are down by 0.70 per cent and 0.43 per cent, respectively. All other sectoral indices were higher. The Media index was up by 5.56 per cent, which is the top gainer. The PSU Bank and Metal indices were up by 4.70 per cent and 2.12 per cent, respectively. FIIs sold Rs45,974.12 crore worth of equities in November. The DIIs bought Rs44,483.86 crore.

The Nifty staged a smart recovery on the weekend after a dramatic 361-point decline on monthly expiry. The index registered a second successive positive weekly close. On Friday, it reclaimed the 20DMA with a lower volume. The index began the week with a vast gap-up opening and traded within the range for the next two days. On the Monthly derivatives expiry day, the index was sharply down by 1.49 per cent, with the expiry-related trades. With this price action, on a weekly time frame, the index closed above the prior week’s high and formed a Hammer candle. As it closed below the open with a lower volume than the previous week, it gives a suspicion on the continuation of the trend.

The benchmark index sustained above the 200DMA and formed a higher low on a weekly chart. Weekly volumes were highest after the third week of July. This shows that the accumulation happened after nine weeks of distribution. Most of the volumes were recorded on Monday. Friday’s rise did not attract much volume. As the index is still below the 38.2 per cent retracement level, we need to wait for a confirmation for reversal. The index is yet to form a higher high above 24,538 points. Last week, the 24343-355 zone acted as resistance for four days. Before making a higher high, it must be close to this resistance zone. The 38.2 per cent retracement level is at 24,414 points. The 10-week average is at 24,521 points. So, the index must decisively clear the 24,343-538 zone of resistance with higher volume for a confirmed trend reversal.

The Mid-cap and Small-cap indices outperformed the benchmark index. The Small-cap index closed above the 50 per cent retracement level, and the Midcap index closed at the 38.2 per cent retracement level. The Microcap index closed above the 61.8 per cent retracement level. This shows that the broader market is improving. But the large-cap stocks weakened last week. After a 6.22 per cent fall in the last month, the Nifty net declined by just 0.31 per cent during November. Only HDFC Bank has broken out of a multi-year consolidation and is the only stock at a new high in Nifty-50 stocks.

The Nifty faced the resistance at 30-week average last week. A close above 24,247-24,538 resistance will be positive and will give the reversal signal. As long as the recent low of 23,263 is protected, expect that the downtrend is stalled. A close above the resistance zone, the target is open to 25,136 points. We can’t forecast more than this for now.

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