Charts signal indecisiveness

The equity indices failed to sustain their opening highs. NSE Nifty gained by 98.60 points or 0.42 per cent and closed at 23,311.80 points. The PSE Bank index is the top gainer with 2.55 per cent. The Metal, Microcap, and Smallcap indices are up by over 1.5 per cent. The PSE and CPSE indices gained by 1.43 per cent each. The FMCG is the top loser with 0.56 per cent. The IT and Pharma indices were down by 0.49 per cent and 0.29 per cent. The India VIX is gained by 1.36 per cent. The market breadth is positive as 2,083 advances and 699 declines. About 35 stocks hit a new 52-week low, and 135 stocks traded in the upper circuit. Kalyan Jewellers, Reliance, HDFC Bank, and Zomato were the top gainers in terms of value.

After a gap-up opening, it filled Monday’s gap area. But soon after the opening, it declined and tested the previous day’s high. The intraday bounces were not sustained till the end. It failed to sustain above the 23.6 per cent retracement level (23,325) of the recent downswing. The index has tested the 8EMA resistance. Importantly, the Nifty is still below the 200DMA and 200EMA. The 50DMA is about to cross under the 200DMA, which is a death cross, a long-term bearish sign. The index is now 2.81 per cent below the 50DMA and 2.77 per cent below the 200DMA. It is still below the previous week’s low. The present counter-trend rally from Monday’s low may end in the next 2 to 3 days. It must close above 23,497 for a confirmed reversal. The RSI is in the bearish zone. The weekly MACD line declined below the zero line. During the last three days of consolidation, the index has formed indecisive or bearish bars, though it registered gains. The recent consolidations were limited to 3 to 4 days only.

The current consolidation is already three days old. With this background, the weekly closing is very important. The Banks and Financials led the market to positive bias. Tomorrow, the heavy-weight stocks Reliance and Infosys are announcing their Q3 results post-market. These results may weigh on the market direction next week. In any case, a negative close below the prior day’s will result in the resumption of a downtrend. The immediate support is at 22,800 on the downside. On the upside, the index must close above 23,325 with volume support. Even a close below last week’s low of 23,344 is also a negative for the index. For now, it is better to stay on the sidelines and trim the portfolio to a concentrated one.

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