Investors need to apply neutral volatile strategies
As the Nifty has formed an indecisive candle, a close above Wednesday’s 18696 will negate the bearish implications
image for illustrative purpose
On a muted trading day, the benchmark indices ended on a flat note. NSE Nifty opened with a positive gap and closed above the gap area, and it traded in the first hour's range. It gained by 52.30 points or 0.28 per cent and settled at 18660.30 points. Only the FMCG index closed with a 0.43 per cent decline. The Realty and Metal indices were the top gainers with 1.25 per cent and 1.25 per cent. The Nifty IT index continued its rally for the second day and was up by 1.15. All other sectoral indices advanced by 0.1 to 0.98 per cent. The market breadth is positive as 1083 advances and 827 declines. About 94 stocks hit a new 52-week high, and 79 stocks traded in the upper circuit. Yes Bank, Uco Bank, and HDFC Bank were today's top trading counters.
Two major indices, Nifty and Bank Nifty, were traded in a range and formed a small indecisive candle. The Nifty attempted to close above the 18665, but failed. It traded in just 64 points range today. The Bank Nifty also traded in just 164 points range and formed a Doji candle. This sideways action, before the weekly expiry, and lowest Implied Volatility (IV) indicates a possible impulsive move. Even the VIX is also down to below 13 level. Low volatility when the price is at lifetime highs indicating that we are heading for a probable topping in the next few days.
The Nifty has to sustain above 18665 for an upside move to continue. As mentioned earlier, Above 18665, there is a probability of making another new lifetime high around the 19000 zone. The Nifty faced resistance today at a 61.8 per cent retracement level of the prior 7-day decline. On the dullest possible day, the volume further declined to the lowest in a month. The conviction on the upside potential is getting blurred. As the Nifty has formed an indecisive candle, a close above today's 18696 will negate the bearish implications. If it closes below or negatively, we can assume that the downside probabilities are increasing and it may retest the 18345. It is better to have a neutral bias on the direction for now and apply neutral volatile strategies.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
