MACD Histogram Shows Declining Momentum

Before the event risk, the domestic equity indices closed positive. NSE Nifty gained by 166.65 points or 0.72 per cent and closed at 23,332.35 points. The Only CPSE index is down by 0.39 per cent. All the other sectoral indices advanced. The Nifty Realty index is the top gainer with 3.61 per cent, followed by the Consumer Durable index with 2.51 per cent. The Midcap-100, Consumption, FMCG, and Smallcap-100 indices gained by over one per cent. All other indices advanced by moderate gains. The India VIX is down by 0.44 per cent to 13.72. The market breadth is positive as 2,148 advances and 757 declines. About 43 stocks hit a new 52-week low, and 247 stocks traded in the upper circuit. BSE, Kalyan Jewellers, BEL, Reliance, and Zomato were the top trading counters in terms of value.

The Nifty has formed an inside bar with lower volume. It is still below the gap area. Just before the event risk, the short covering is seen across the board. The Open Interest (OI) declined by 0.89 per cent on a 0.54 per cent advancing days, which is also an indication of the unwinding of positions. The index closed almost at the previous day’s opening level and on the 8EMA. There was no change in the directional bias as it formed an inside bar. The RSI is in the neutral zone. The MACD histogram shows a decline in the momentum. On a positive day, this is not a good sign. On a weekly chart, the index formed a Doji candle. The next two days are crucial for the global equity markets. The Asian and European markets are trading lower. But our market closed positive, which is a surprise. The India VIX is subdued, and the IV is also flat. For an upside, the index must close above the 23,500 level. If it sustains below 23,350, on the weekly closing basis, it is negative, and it can immediately support 50DMA of 23,001. The 23,000-600 zone is very crucial for a directional bias now. Wait for an opening or close for directional bias. As the weekly derivative expiry is scheduled, it is better to stay very vigilant and track the positions.

(The author is partner, Wealocity Analytics, Sebi-registered research analyst, chief mentor, Indus School of Technical Analysis, financial journalist, technical analyst and trainer)