MACD shows slowdown in momentum
Better to trade only highly conviction stocks; On hourly chart, the index formed lower highs and lower lows
image for illustrative purpose
The 23.6% retracement level is at If the index closes below 22,806pts, expect it to test the level of 22,477-46. As the monthly expiry is on cards, traders are not interested in taking positions. Along with the General election results, RBI Monetary policy is scheduled for next week, these event risks are causing nervousness in market
Equities were traded nervously as the risks of the event were lined up. NSE Nifty declined by another 44.30 points, or 0.19 per cent, and closed at 22,888.15 points. Nifty Pharma index is the top gainer with 0.54 per cent, followed by the Media index with 0.31 per cent. On the flip side, the Realty index is the top loser with 2.16 per cent. The CPSE and PSE indices declined by 1.61 per cent and 1.36 per cent, respectively. The energy index also declined by 1.21 per cent. The India VIX is up 4.32 per cent to 24.19. The market breadth is negative, with 1,795 declines and 809 advances. About 89 stocks hit a new 52-week high, and 118 stocks traded in the lower circuit. HAL, HDFC Bank, Exide Industries, and National Aluminium were in top trading counters on Tuesday.
After three successive lifetime highs, the Nifty took a breather. In fact, the index has formed a strong bearish candle and confirmed the prior bearish candle’s implications. It closed below the prior day’s low and the day’s lowest level. Though the decline is with lower volume in the past two months, the price pattern at the resistance indicates internal weakness. The advance-decline ratio is further worsened. The Nifty took support at 5DMA and held for the day. The RSI is declining in the bullish zone.
The MACD histogram also shows a decline in the bullish momentum. On an hourly chart, the index has formed lower highs and lower lows. It corrected by 252 points from the prior day’s all-time high. The Nifty closed at the strong support of 22,800-850. zone. The 23.6 per cent retracement level is at 22806. If the index closes below this support zone, expect to test the 20DMA or 50 per cent retracement level of 22,477-465.
As the monthly expiry is on cards, traders are not interested in taking positions. Along with the General election results, the RBI Monetary policy is also scheduled for next week. Because of these event risks, the indices were trading nervously. It is better to trade only highly conviction stocks.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
