Keep risk management in place to protect capital

Equity markets experienced a volatile session due to sudden selling pressure in trenches and intraday consolidation. Nifty closed at 17660, with 46.7 points or 0.26 per cent decline. Nifty Pharma is the top gainer with a 1.64 per cent upswing. The Nifty Metal, IT, and Auto indices closed in green. The Energy, FinNifty, Banknifty, FMCG, and Infra indices registered losses. About 63 stocks hit a new 52-week high, and 61 stocks traded in the upper circuit. HDFC Bank, HDFC and ICICI Bank were the top trading counters on Tuesday in value.

Nifty has formed a second consecutive open high candle. Both frontline indices, Nifty and Banknifty, have formed inside bars. The volumes were lower than the previous day. Importantly, Nifty sustained below the anchored VWAP resistance and below 17800. Interestingly, Tuesday's move is also inside Monday’s first-hour range. Tuesday’s fall has more relevance for the bears, as many sectors support it. The index closed below the 5EMA for the first time after 28th March.

The RSI has declined into the neutral zone from the strong bullish zone. The MACD line has flattened, and the histogram shows a decline in the bullish momentum. The Stochastic line also declined from an extremely overbought condition. On an hourly chart, the index has witnessed big bearish candles and some intraday consolidation.

To resume the upward move, it must close above the prior day's high and 17800. During the last two days, it tested the 23.6 per cent retracement of the 9-day swing. A close below 17639 will hint at the correction. The immediate next support is at 50DMA of 17508. Now, the 50DMA is also flattened from a downtrend. For now, wait for the directional move to change the bias. Keep risk management in place to protect the capital.

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