Close below Doji confirms bearish bias

The equity market collapsed for the second straight session with more than 100 points. Across the board selling pressure haunted the benchmark indices. The Nifty down by 120.30 points or 0.76 per cent and settled at 15632.10. Barring FMCG and Consumption indices, all the sectoral indices declined. FMCG index up by 0.14 per cent. The Metal and Realty indices declined by 2.34 per cent and 2.53 per cent, respectively. The Bank Nifty fell by 1.89 per cent, and Fin Nifty lost 1.59 per cent. Nifty Pharma closed with 1. 3 per cent loss. The Market breadth is extremely negative as 1492 declines and just 458 advances. About 149 stocks hit a new 52-week high, and 197 stocks traded in the lower circuit.

The Nifty closed below Monday's Doji candle and given confirmation to the bearish implication. At the same, it just closed on the support line and giving hopes of a bounce. After June 9, the benchmark index closed on 15,632 support. It has tested this level several times since June 1. It took support at the 50DMA, and the bounce helped it close at the support. The MACD histogram shows an increase in the bearish momentum. The RSI closed below the prior swing low and the historical support of 45. Even on the weekly chart, the RSI is reacting from the resistance. Now, the 20DMA also began to trend down after three days of positive strength.

With the last two days fall, the price structure is damaged. As the negative divergences confirm the bearish tone and the supports are breaking down, it is time to avoid the long positions. The India VIX rose to above 14 in Tuesday's trading is the first sign that the storm is coming. Implied Volatility (IV) is also rising to 11.28 is also a signal that the higher swings are to come. The Nifty registered second consecutive distribution day is showing the distribution happening. The FIIs are continually selling the equities. If the selling pressure continues, the Nifty may test 15,431 points, which is a major swing low. As the several evidences are showing the direction on the downside, apply strategies accordingly.

(The author is financial journalist, technical analyst, family fund manager)