Nifty chart indicates downtrend for mkts
The probability of moving in a sideways is high. In any case, it closes below the 17225-210 will be negative for the market, and the Nifty will continue its downward move
image for illustrative purpose
The Indian equity benchmark indices closed in the negative territory on a volatile day. The Nifty declined by 43.35 points or 0.25 per cent and settled at 17324.90. The Nifty Media and Pharma indices are the top gainers with 1.56 per cent and 1.06 per cent, respectively.
The other sectors indices either closed with less than half a per cent gains or losses. The Next Nifty 50 gained by 0.33 per cent. India VIX up by 2.31 per cent. Today declines are outnumbered by 1045 stocks, advances are 983. About 103 stocks hit a 52-week high, and 177 stocks traded in the upper circuit.
The benchmark index closed below the prior day low. It also tested almost 50 retracement levels of the prior upswing and closed just on the 38.2 per cent retracement support. Tuesday's closing below the 17355, confirmed the prior day's bearish engulfing implications on the downside. The 20DMA acted as resistance today. The Nifty filled the gap of 8th December. It also filled the opening gap. On a lower time frame, today's move looks like a counter-trend pattern, Flag.
The Nifty formed a small body candle. This indicates indecision about the continuation of the down move. There is a probability of a small bounce. This bounce must not close above the 17383(20DMA) to 17432 zone of resistance. The probability of moving in a sideways is high. In any case, it closes below the 17225-210 will be negative for the market, and the Nifty will continue its downward move.
The index already declined below the 5 and 8 exponential moving averages, and 20 and 50 simple moving averages is nothing, but an indication of a downtrend. The bounces are common in this downtrend. As mentioned in the previous analysis, the declines are sharper and in lesser time. As the bearish engulfing got the confirmation candle, expect the next three -five days of weakness in the market.
Even though it recovered 100 points from the day's low and a close above the open, the conviction among bulls is very low. None of the sectors or heavyweight stocks are in a position to lead.
(The author is financial journalist, technical analyst, family fund manager)
