MACD Indicates Muted Momentum

In a narrow trading range day, the index traded nervously. NSE Nifty declined by 58.80 points or 0.24 per cent. The Metal and Midcap indices gained 0.50 per cent and 0.62 per cent, respectively. Consumer Durable, Microcap and Realty indices also gained moderately. The FMCG and Media indices declined by 2.22 per cent and 2.02 per cent, respectively. The Consumption, Auto, Oil and Gas in PSU Banks declined by over 0.50 per cent. The India VIX is down by 0.23 per cent to 14.11. The market breadth is positive as 1540 advances and 1313 declines. About 140 stocks hit a new 52-week high, and 167 stocks traded in the upper circuit. ITI, HDFC Bank, BSE, Reliance and Ceat are the top trading counters in terms of value.

The Nifty formed a lower high and lower low candle on a very narrow trading range day. Volumes were lower for the last two days. The last two days of price action are limited to last Thursday’s range. It closed near the day’s low and formed a long upper shadow candle, a shooting star, which shows the profit booking on cards. It is above the 50DMA. However, the 50DMA is still in the downtrend and has yet to turn on the upside. The Index is now just 0.40 per cent above the 50DMA. Two back-to-back bearish candles within Thursday’s price have provided any direction view. The MACD histogram suggests muted momentum. The RSI is in the neutral zone for the second day.

In any case, the index declines below 24538 will be negative and can take support at last Thursday’s low of 24295. After last week’s massive move, it may consolidate for some time before resuming the trend. Only a close below 20 DMA of 24071 is negative. The 20DMA is in the uptrend. In a nutshell, the market is consolidating after a big move on the upside, with low volume, which may not sustain for a long period. On the upside, a close above the prior high may give more upside. If the index clears 24858, We may see a strong upside move. For now, stay with a cautiously positive approach.

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