It’s not a time to hold long positions in stocks
VIX is dangerously at its lowest level, which may show its impact on prices from now
image for illustrative purpose
The equity benchmark indices slipped below crucial resistance. Nifty closed at 17944.20 with 91.65 points or 0.51 per cent decline. The banks were the reason behind in Friday's fall. The Banknifty declined by 1.20 per cent. Only Energy, Infra, CPSE, and PSE indices advanced by less than half a per cent. The Realty, IT, and Pharma indices declined by 1.18 per cent to 1.78 per cent. All other indices are down by less than a percentage point. The broader market breadth was negative as 1232 declined and 685 stocks advanced. About 98 stocks hit a fresh 52-week low, and 68 stocks traded in the lower circuit. Reliance, HAL, and Adani Enterprises were the top trading counters today in terms of value.
Our forecast proved right with Friday's decline with confirmation to the evening star candle. The Nifty failed to close above the 20 week average, and it formed a long-legged, small-body candle. It closed below the 23.6 per cent retracement of the recent upside move of 17353-18134. Interestingly, it also closed below the Budget day high. The Nifty has faced strong resistance at the downward channel and declined sharply. The 50DMA acted as a resistance. It closed below the 100DMA too.
The Nifty has formed a rising wedge pattern which is negative. A decline below Friday’s low of 17884 will confirm the pattern breakdown. All the momentum indicators declined on Friday. As mentioned on Thursday, the VIX is dangerously at its lowest level, which may show its impact on price from now onwards. Now the question is will it hold the 20DMA support of 17847 and 38.2 per cent retracement level of 17744? This zone is very crucial for a bullish bias. In any case, if the Nifty closes below 17744, it can retest the 17520 or even below also. The selling volume is higher, and the index has registered a distribution day. For now, not a time to hold long positions.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
