Nifty can take a downturn if closes below 14.6k levels

The stock market plunged owing to the European GDP fears. As the US and European market futures were trading lower and the US 10 Year bonds once again bounced to the recent high, the Indian market tumbled after opening with 161 points gap up. All the initial gains melted, and it fell sharply over 300 points by the end of the day.

The Nifty managed to close above 15,000 levels. It closed with 143.85 points net loss. Barring CPSE and Smallcap-100 index, all the sectoral indices closed with losses. The Banknifty fell sharply by 1,000 points from its day's high. FinNifty fell by 1.92 per cent and the Auto index down by 1.66 per cent. The market breadth is negative as 1,126 declines and 780 advanced. The FIIs have become cautious and gradually slowed their investment in the Indian market. Once again, the gap up opening did not sustain at higher levels. The Nifty formed a big engulfing candle. It also closed below the previous day low. On the weekly chart, it formed another bearish gravestone doji. For the past five weeks, it was moving in a range and every bounce used as an opportunity to book profits. It actually fell sharply by over 300 points, which is a bigger fall after 26th February.

Though it breached 15,000 levels on an intraday basis, it was able to close above it. And it also breached trend line support, finally able to protect the support. It also breached 20DMA on an Intraday basis, but closed just above it. Today's high 15,336 has become resistance for next week. In case it closes below 20DMA next week, the immediate support is placed at 14,862. And the 50DMA support is at 14,680.

These are important levels for the near term. In the medium term, 26th February low or swing low 14,467 will act as a major swing. Only in the case of closing below this level will the market status turn into a downturn. On the upside, as mentioned above, today's high 15,336 and the previous lifetime high 15,431 will act as a strong resistance.

After it made a new lifetime high on 16th February, post-budget, the Nifty is struggling to move directionally. As the indicators are showing negative divergences, we may consider some distribution will happen at the highest levels. With today's fall, negative momentum indicator, -DMI has moved above the +DMI, which is a weaker signal for the market.

Interestingly, the ADX, which is a trend strength indicator has declined from 32.32 on a lifetime high to 14.86, is more than 50 per cent. This is another indication of a distribution. In this scenario, the upside is limited, but it needs a close below 50DMA to turn bearish. Currently, 20DMA and 50DMAs are important supports. Between these two averages, we may not get the right trading opportunities.

(The author is a financial journalist, technical analyst, family fund manager)