Investors need to stay neutral

With a lack of trading volumes and concentrated trades limited to select stock, the broader market witnessed a lackluster day. The benchmark index Nifty closed at 18497.15 with just half point gain. Nifty IT and Pharma indices were down by 0.40 per cent and 0.13 per cent, respectively. Only the PSU Bank index gained over 1.4 per cent. But all other sectoral indices gained by just less than 0.5 per cent. The market breadth is slightly positive as 1017 advances and 924 declines. About 78 stocks hit a new 52-week high, and 79 stocks traded in the upper circuit. Yes Bank, Infosys and HDFC Bank were the top trading counters today.

The market witnessed another volatile day and closed on an absolute flat note. After opening with a negative gap, the Nifty rallied for the first hour. It recovered 175 points from the opening low. Later it erased more than 50 per cent of the day's gains. The index has formed a lower high and lower low candle, and it also closed below the 20DMA. As we discussed earlier, this is the first sign of weakness. It tested the 23.6 per cent retracement level (18382), and took support. For now, the 20DMA (18504) and the 23.6 per cent retracement level will act as crucial resistance and support for tomorrow. In other words, today's range of 18345-521 will be crucial for a directional trade. Within this range, another day of sideways will continue.

The Nifty sustained below the moving average ribbon on an hourly chart. The Daily RSI is almost flat, but the MACD histogram shows an increased bearish momentum. The index has also tested the previous resistance and support. If the index closes below 18345, the chances of the intermediate trend will be on the downside. In such a case, the index will test 18070. We may see more and more volatile sessions from now. The volume and the market breadth is a concern now. Except for the PSU Bank index, none of the indexes gained or lost by a percentage. There was a long unwinding happening in the derivatives segment. For now, it is better to have a neutral stance until a clear directional trade emerges.

(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)