Nifty closes below 2-day low giving way to bears

THE hopes of resumption of upswing vanished with a fresh sell-off on Wednesday. A day before the monthly expiry, fresh shorts were built up in the market. The volatility increased. The Nifty fell by 265.35 points or 1.79 per cent. Barring Nifty Pharma, all the sectoral indices declined. The Metal and PSU Bank indices fell by over three per cent. The Bank Nifty was down by 2.61 per cent, and Fin Nifty declined by 2.13 per cent. The market breadth was extremely negative as 1,430 declines and 457 advances were recorded.

The NSE Nifty fell sharply and registered the lowest closing after February 26. Opened with a gap down and closed at low and below two-day low. Just three days of positive bias erased in one stroke. The short-term moving averages, 5 and 8 EMA, again turned down. The Nifty never fell below 50DMA after closing above it since May. This shows the unsustainability of positive bias. Now, Tuesday's high of 14,878 has become a resistance level for the market.

Currently, the benchmark index is trading 2.28 per cent below the 20DMA and 1.5 per cent below the 50DMA. In any case, the 20DMA that falls below the 50DMA, will indicate a stronger bearishness. The recent low of 14,469-350 zone of support will be critical for now. In case, it breaches, the next level of support at 14,297 points, is also a 61.8 retracement level of the budget rally. There are four trading sessions left in March. The monthly candle resembles a shooting star, which is bearish, is not good for the market. Even January and February also formed long upper wick candles.

In the other sense, a close below 14,460 will lead to a double top breakdown. As the hopes of resuming the uptrend is vanishing, it is better to be ready for big short trade below 14,460-350 zone.

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