Keep Off Building Positions For Now

As the current downswing is six days old, it may halt for one or two days before resuming. Any bounce must close above 25,067 for positive bias. None of the Nifty-500 stocks are in buy zone, showing broader market weakness

The equities fell for the sixth straight session as the selling pressure escalated. NSE Nifty declined by 218.85 points or 0.87 per cent and closed at 24,795.75 points. The Media index is the top loser with 3.65 per cent. The PSU Bank, PSE, and CPSE declined by 3.31 per cent to 3.11 per cent. Only the Nifty IT index closed with a 0.66 per cent gain. All other sectoral indices ended with a sharp decline. The India VIX is up by 6.74 per cent to 15.08. The market breadth is extremely negative as 2,490 declines and 384 advances. About 131 stocks hit a new 52-week low and 420 stocks traded in the lower circuit. HDFC Bank, Reliance, ICICI Bank, and BSE were the top trading counters in terms of value.

The Nifty made a lower low as it declined below the prior swing low of 24,753 on an intraday basis. After opening with a positive gap above the 50DMA, the index declined sharply within a few minutes. It made a lower high on a lower time frame. The volume was above average. The Nifty declined by 6.02 per cent from its all-time high in the last six days without a single positive day. It closed below the prior day’s low on six days. The PSUs were the worst hit. The market breadth is extremely negative and the worst in the last six days. Now, the Nifty is 0.90 per cent below the 50DMA, with four distribution days. A lower low, below 50DMA, and the RSI in the bearish zone mean the market has entered a downtrend. The 100EMA support is at 24,383 points, which is the nearest support now. The index closed at a 61.8 per cent retracement level in the prior upswing. As the current downswing is six days old, it may halt for one or two days before resuming. Any bounce must close above 25,067 for positive bias. The 10-week average is also at a similar of 25,097. This means that Monday’s high 25,143 will be a herculean resistance to breach. None of the Nifty-500 stocks are in the buy zone, showing broader market weakness. The majority of PSUs, irrespective of sector, declined below 50 DMA and 200 DMA. For now, it is better to stay on the sidelines and wait for the base to form. Identify the stocks that fell more than 50-60 per cent from their top and have good earnings. Look for a base breakout to buy these stocks. Till then, it has been advised to keep away from fresh purchases.

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