It’s time to wait for range breakout

If Nifty continues to be positive and closes above 23,667, it will be positive and can move to higher levels. But a close below 23,441 level is negative and moves lower. As monthly derivatives expiry is scheduled this week, the volatility may increase

Positive Market Breadth

• 1,420 advances
• 1,276 declines
• VIX is up by 6.45%
• 155 stocks in upper circuit
• 192 stocks hit a 52-wk high
• MACD shows decline in momentum

In a 208-point range day with the lowest volume, the benchmark index closes with a positive bias. NSE Nifty advanced by 36.75 points or 0.16 per cent and closed at 23,537.85. Nifty Auto and Consumption are the top gainers with 0.85 per cent. The PSU Bank is the top loser with 0.66 per cent. All other sector indices closed with moderate gains or losses. The market breadth is positive as 1,420 advances and 1,276 declines. About 192 stocks hit a new 52-week high, and 155 stocks traded in the upper circuit. HDFC Bank, HAL, RVNL, and Idea Vodafone were the top trading counters in terms of value.

The Nifty opened with a 118.80 points gap down and declined below the short-term support in the first hour. It gradually picked up and closed positively. But the issue is low volume. The momentum is still lagging. The positive aspect of Monday’s market is that, the prior day’s bearish engulfing candle failed to get the confirmations for its implications.

The Nifty and broader market’s breadths are almost neutral. As the index did not close below the prior day’s low, it has not given any reversal signal. The Nifty closed above the 8EMA. It formed a lower high and lower low candle. Interestingly, on a just 0.19 per cent gaining day, the India VIX is up by 6.45 per cent, which is surprising. Even the open interest is also up in the last week of monthly expiry.

The Options are not attractive to write. After the first two hours of trading, the index moved in 60 points range. Interestingly, none of the sector indices gained or lost more than a per cent. As the index formed a lower low candle, it is better to have a neutral bias. The RSI has been in the 60-61 zone since 12 June. The MACD also shows a further decline in the momentum. In any case, the Nifty continues to be positive and closes above Friday’s high of 23,667 points, which will be positive and can move to higher levels.

But a close below 23,441 level is negative and moves lower towards the 20DMA. As the monthly derivatives expiry is scheduled this week, the volatility may increase. Any profit booking move may impact the ongoing trend. The longer the consolidation, the sharper the move. Wait for a range breakout for a decisive trade.

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