MACD shows increased bearish momentum
Nifty erased last 2 days’ gain and formed a big bearish engulfing bar; It closed below the breakout level with high volume; Time to book profit at every level
image for illustrative purpose
With the sell-off in PSUs, IT, and Midcaps, the broader market weakened. The benchmark index Nifty declined by 141.90 points or 0.64 per cent and closed at 22,055.05 points. The Media index is the top loser with 4.91 per cent. The PSE and CPSE indices are down by 2.5 per cent and 2.3 per cent, respectively. The Nifty IT, Energy, Mid-cap, and Small-cap indices are down by over 1.5 per cent. The Realty is the top gainer with two per cent, and PSU Bank Metal indices were able to close with modest gains. All other indices ended in negative territory. The market breadth is negative as 1,673 declines and 885 advances. About 161 stocks hit a new 52-week high, and 94 stocks traded in the upper circuit. HDFC Bank, ABB, Reliance, and JioFin were the top trading counters on Wednesday, in terms of value.
The Nifty erased the last two days’ gain and formed a big bearish engulfing bar. It closed below the breakout level with high volume. Our suspicion about the low-volume rally turned out a reality. With Wednesday’s high volume in the last six days and above average, the Index has registered a fresh distribution day.
The RSI went back into the neutral zone from the bullish zone. If the RSI fails to move above 63.54, a negative divergence will from. The Relative Strength line is below 21EMA and is an indication of a continuation of underperformance. The momentum is waning again. On an hourly chart, the MACD shows an increased bearish momentum. As the index closed below the hourly moving average ribbon, expect the bears to dominate on the weekly derivatives expiry day. The selling pressure was more in the Mid and Smallcaps. The PSU stocks were declining sharply from an extremely overbought condition. If the Nifty closes negatively, expect more downside. As the broader market was weakened, It is better to book profit at every level. The Nifty may test the 10-week average by next week. Stay alert on every trade.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
