MACD Shows Strong Bearish Bias

The equities nosedived again with high volatility. NSE Nifty declined by 320.10 points or 1.37 per cent and closed at 23,024.65 points. The Realty and the Consumer Durable indices down by 4.12 per cent and 4.06 per cent are the top losers. The Next Nifty, Midcap, and Smallcap indices closed with over two per cent losses. Only FMCG, Healthcare, and Metal indices closed with less than a per cent losses. The India VIX is up by 3.90 per cent to 17.05. The market breadth is extremely negative as 2095 declines and 715 advances. About 58 stocks hit a new 52-week low, and 91 stocks traded in the upper circuit. Zomato, Dixon, HDFC Bank, ICICI Bank, and Reliance were the top trading counters in terms of value.

The Nifty declined sharply by 1.44 per cent, more sharply than last Monday. The volatility has played an It has formed a bearish engulfing candle on a highly volatile day. The index has ended the last six days of counter-trend consolidation and made a new low at 22976.85. On an hourly chart, the index registered a bearish flag breakdown. Now, the index is 3.64 per cent below the 50DMA. The Bollinger bands in a downtrend. The Nifty registered another distribution day, as the volumes were higher than the last six days, on a 1.30 per cent decline. The derivatives data suggests that the highest number of short positions were built up in the indices after the Election results day. Over a 7 per cent rise in the open interest also suggests shorts built up. Like last Monday, all sectoral indices ended with losses. As the index formed a lower low, we can assume that the downtrend has resumed after a 7-day break. The MACD histogram shows a strong bearish momentum. The Elder impulse system has formed a fresh bearish bar. The Stochastic RSI has also given fresh bearish signal. In short, the market is experiencing the highest volatility and ended the consolidation. As the index resumes the downtrend, avoid taking long positions. Expect more volatile days till the budget.

(The author is partner, Wealocity Analytics, Sebi-registered research analyst, chief mentor, Indus School of Technical Analysis, financial journalist, technical analyst and trainer)