Current Swing Signals High Volatility For Next 5 Sessions

As expected, the equity indices declined as the profit booking in the broader market. NSE Nifty declined by 181.80 points or 0.77 per cent and closed at 23,486.85 points. Only Nifty Auto index closed flat to positive. All other sectoral indices declined. The Nifty Media is the top loser with 2.40 per cent. The Microcap-250 index is down by 1.69 per cent. The Oil and Gas, PSE, Realty, Healthcare, CPSE, PSU Bank, Smallcap, Services and FinNifty declined by over one per cent. The India VIX is also down by 1.21 per cent to 13.47. The market breadth is negative as 2,303 declines and 622 advances. About 187 stocks hit a new 52-week low, and 180 stocks traded in the lower circuit. Zomato, HDFC Bank, HAL, Mazdock, and Reliance were the top trading counters in terms of value.

The Nifty closed decisively below the prior session’s low and confirmed the end of the rally. The index reacted from the 30-week average. It closed near the key support level of a 23.6 per cent retracement of the prior upswing. The volumes were lower than the previous day. The RSI is also trying to come out of an extreme overbought zone. For now, the 23,420 is the crucial support. The 200EMA is also placed at a similar level of 23,403. If the Nifty closes below this crucial support zone, expect a decent retracement towards 50DMA. On the upside, the index must close above the prior day’s high to resume the uptrend. As the index begins the downswing, it is important to watch at what level it will end. There are a series of supports placed up to 22,715. Only below this, we need to be very cautious on the market. The current swing may witness high volatility for the next 5-8 trading sessions. Wait for a move below the 23,400 for a confirmed reversal signs. It is the time to keep booking profits at the higher levels.

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