MACD shows declining bearish bias

On a highly volatile day, the indices closed higher with high volume. NSE Nifty gained by 203.30 or 0.92 per cent and closed at 22,403.85 points. The only PSU Bank index was closed down by 0.88 per cent. The Consumer Durable Index was the top gainer on Thursday, with 1.72 per cent, followed by IT with 1.66 per cent. The Realty is also up by 1.63 per cent. The Media, FinNifty, PSE, and Nifty next 50 indices gained over one per cent. The India VIX is down by 1.37 per cent to 19.99. The market breadth is positive as 1,527 advances and 1,070 declines. About 115 stocks hit a new 52-week high and 140 stocks traded in the upper circuit. HAL, Tata Motors, HDFC Bank, and Reliance were the top trading counters on Thursday, in terms of value.

The volatility ruled the weekly expiry day. First, it opened with a 120-point gap up and declined by 202 points from the day’s high. It recovered sharply by 184 points withing 60 minutes. Then again declined by 243 points. In the last hours, the index has recovered all losses and closed above the opening level by sharply up by 348 points. This kind of volatility is seen on the event risk day. The daily range was increased to 378 points, with high volatile swings.

The stop losses triggered on both sides in these swings. The Volumes were higher than in the last nine days and recorded as above average. The Nifty has formed an outside bar. This is mainly because of the short covering. It formed a long lower shadow and doji candle on a daily chart. HDFC Bank, Infosys, and Bharti Airtel led Thursday’s rally. The PSU banks were lagging on Thursday. With the huge recovery, it closed above the 10-week average, too. Importantly, the 20 and 8EMA acted as a strong resistance till the last hour. But, with the bull power, the index closed above both moving averages.

It retraced by 61.8 per cent of the prior fall. The RSI crossed 53, and the MACD histogram shows a decline in bearish momentum. If the index closes positively for another day, above 22422, expect the Nifty to test the 22586-630 zone of resistance. With Thursday’s move, all the bearish bets were triggered to stop losses. Now, stay with an optimistic view with a 22300-260 support zone as a stop loss. The volatility will increase further till the event risk is over. Avoid trading in derivatives and stay only with highly conviction stocks in the portfolio.

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