Nifty forms an indecisive candle

On a weekly expiry day, the index traded in a relatively low range of just 268 points. The Nifty gained by 201.05 points or 0.89 per cent and closed at 22821.40. The Realty index is the top gainer with 4.69 per cent. The PSE, Media, and Smallcap indices gained by over 3.20 per cent. The PSE, IT, PSU Bank, and Midcap indices were up by over 2 per cent. Barring FMCG, Pharma, and Private Bank indices, all the sectoral indices closed positively. The declines were limited to just less than half a per cent. The India VIX has collapsed by 11.04 per cent to 16.80. The market breadth is extremely positive as 2233 advances and 405 declines. About 83 stocks hit a new 52-week high, and 269 stocks traded in the upper circuit.

The Nifty’s trading range over the past four sessions has been a significant 2057 points. Initially buoyed by exit polls, the Nifty surged by 733 points or 3.25. However, with the emergence of contradictory results, the Nifty experienced a sharp decline of 1379 points or 5.93 per cent on a closing basis. This resulted in an overall trading range of 2057 points or 8.81 per cent in the last four days. Post-COVID, the index saw its sharpest decline, but it has since recovered the losses in the last two days, retracing by 78.6 per cent of the previous two days’ move. The index has been trading with significant volume in the last five days.

The Nifty is back into the rising channel’s mean level after breaking down on Tuesday. It is also above the 20DMA, and 50DMA is a positive sign. The last two days of price action can be considered as a counter-trend move. Normally, after such impulse moves, the counter moves are common. As stated earlier, the Nifty has tested the 21300 level. It declined by 8.81 per cent from the top. This is the big correction after 2022. It took 16 weeks to correct 10.90 per cent. But, this time, on a single day, the index has corrected by 8.8 per cent. This knee-jerk reaction is expected earlier. Now, the market is in the process of settling down. The range of 23339-21281 zone is very crucial, and it may take time to come out of it. Interestingly, the negative divergence still exists in the weekly chart. The daily RSI is in the neutral zone. As the index has formed an indecisive candle on Thursday, expect the counter-trend to halt for some period. The immediate support is at 20DMA, 22556. The 50DMA is at 22453. On the upside, It must close above Thursday’s high to continue the positive bias. The Index is already up by 935.50 points or 4.27 per cent from Tuesday’s close to Thursday’s close, so we may see profit booking on most rallied stocks. Watch the sector rotation and relatively better-performing stocks. Try to take out the trading profits partially. The Nifty may consolidate till the next major trigger, the General Budget. The RBI monetary policy on Friday may also increase the volatility.

(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)