MACD shows bearish momentum on all time frames
The benchmark index registered another distribution day with heavy volume selling and over 0.68% fall
image for illustrative purpose
Bearish Market Structure
• 47 stocks hit a new 52-week low
• 177 stocks traded in the lower circuit
• Expiry trades may lead to a sharp bounce on short covering
• For a long position, Nifty must form a flat base
• Otherwise, it’s not right time to go aggressively long
The benchmark index collapsed for another day and closed below the prior major low. NSE Nifty declined by 159.60 points or 0.83 per cent. Only the Nifty Metal and PSU Bank indices are up by 0.15 per cent and 0.17 per cent, respectively. The Nifty IT index is the top loser with 1.03 per cent. The Realty, Finnifty, Infra, and Bank Nifty were down by over half a per cent. All other indices also declined by less than half per cent. The India VIX is up by 3.74 per cent. The market breadth is negative. After a long time, 47 stocks hit a new 52-week low, and 177 stocks traded in the lower circuit. HDFC Bank, Reliance, ICICI Bank, and Infy were the top trading counters today in terms of value.
The Nifty made a new major low on Wednesday by testing the 19,074.15 level. The index has registered another distribution day with heavy volume selling and over 0.68 per cent fall. With this, the market entered into a confirmed downtrend. The index took a sloping channel support line. It closed below the lower Bollinger band for the second consecutive day. The hourly RSI is trying to come out of the oversold condition. With this, there is a highest probability of a reasonable bounce towards today’s high.
Overall, the market structure is bearish. But the expiry trades may lead to a sharp bounce as the short covering. A 26.5 per cent rise in Open Interest shows that fresh shorts were built up in the system. The 19,000 support will act as a psychological support. The Nifty closed 1.77 per cent below the 20-week average, which is seriously negative. The Mansfield Relative Strength declined much below the zero line. The RSI is at 32 and near the oversold zone.
The Daily Stochastic RSI is also near the extreme zone. The MACD shows a strong bearish momentum on all time frames. Any short covering will lead to a sharp upside move. Stay on the sidelines and avoid fresh short positions currently. For a long position, the Nifty must form a flat base. Otherwise, it is not a good time to go aggressively long.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
