Charts suggests increase in bearish momentum
If Nifty breaks below the 16604 on a closing basis, it will test 16200 levels within no time; any pullback will give a fresh selling opportunity as the mkt enters into a confirmed downtrend
image for illustrative purpose
A surprise monetary policy announcement by RBI caused a sharp decline and resulted in around Rs.6 lakh crore of market capitalisation erosion. RBI has increased both policy rates by 40 and 50 basis points. The benchmark index, Nifty down by 391.50 points or 2.29 per cent and closed at 16677.60. The Nifty Media and Metal indices were the worst hit with 4.29 per cent and 3.27 per cent.
The other sectoral indices were down by 1 - 3 per cent. The India VIX is up by 7.86 per cent and settled at 21.88. The market breadth is extremely negative as 1819 stocks declined and 369 advanced. After a very long time, more stocks, 52, hit a 52-week low, and 153 stocks traded in the lower circuit. Reliance, HDFC Bank, and Tata Steel were the top trading counters. With the sudden and surprise RBI monetary policy, the markets crashed.
Finally, the Nifty has broken down on unexpected event risks. It is once again proved that the price discounts everything. The index broke the counter-trend consolidation with added distribution day. The Nifty closed at the day low and 61.8 per cent retracement level of the prior trend. As we keep stating in this column, the 16600 targets were met. Now the breakdown target is due at 16200.
As the Nifty is trading below 50 and 200 DMAs, the number of distribution days increased to eight. With this technical parameter, the Nifty has ended the minor trend and entered into a confirmed downtrend.
Currently, the index is trading at a 7-week low and has broken the parallel support. The histogram suggests bearish momentum has increased. The RSI (38.57) entered the bearish zone. The Elder impulse system has formed a strong bullish candle. Many industry stocks have witnessed technical damage, with many of them moving deeper into their bases and breaking below their key supports.
In any case, the Nifty breaks below the 16604 on a closing basis; it will test 16200 levels within no time. It is better to protect the capital and exit the weak stock in the portfolio. Avoiding the risk is a better money management technique now. Any pullback will give a fresh selling opportunity as the market enters into a confirmed downtrend.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
