Markets poised for downside move
Nifty closed below Tuesday’s low; RSI closed below prior swing low and the histogram shows a further increase in bearish momentum
image for illustrative purpose
The domestic markets failed to sustain the gains. The Nifty gapped higher by almost 100 points, but closed with an 85.80 points loss. After missing a new lifetime high with just six points, now it's over 200 points away. The Nifty settled at 15,686.95 points with a 0.54 per cent loss. Barring the Nifty Auto index, which is up by 0.46 per cent, all the other indices down by around half a per cent. The Nifty Metal index declined by 1.13 per cent, the most. The market breadth is negative as 1193 declines and 780 advances. 193 stocks hit 52 weeks high, and 150 stocks were in the upper circuit.
The market reversed the major portion of the gains. The Nifty retraced over 50 per cent of the last two days of price action. It formed an engulfing bar and the most bearish bar in recent times. It declines 200 points from day's high. The 90 point gap-up opening not sustained. Today's move is exactly opposite of the Monday's move. It also formed bearish belt hold as the open level is high for the day. As the market breadth is negative.
As we suspected about the conviction of the upside move still valid. Just a day before the expiry day. We are expecting this kind of sharper move for the last few days. The VIX once again moved above the 15 and up by 4.26 per cent. A move above 18 will indicate further higher daily ranges. It is extremely difficult to trade in shorter periods. As we mentioned on Tuesday, the 15,895 level is a critical resistance for now. The Nifty closed below the previous day's low, the market is poised for a downside move. Moreover, the Nifty also retraced over 50 per cent of the last two days of the upside move. The RSI closed below the prior swing low and the histogram shows a further increase in bearish momentum. It closed below the Moving average ribbon on a 75-minute chart along with MACD line below zero line, is a bearish setup. As the expiry in place better to avoid aggressive positions. A higher intraday swing will hurt the risk-reward ratio.
(The author is financial journalist, technical analyst, family fund manager)
