Nifty forms bearish candle

Negative Market Breadth

♦ 82 stocks hit a new 52-week high

♦ 60 stocks traded in the upper circuit

♦ VIX rises 20% in last 4 sessions, breaks 17-wk range

The selling pressure mounted in the broader market. The benchmark indices are down by percentage points. NSE Nifty declined by 192.90 points or 0.98 per cent and settled at 19,523.55 points. The Nifty IT is the top loser with 2.19 per cent. The FMCG, Media, Auto, and PSU Bank are down by 1 - 1.91 per cent. The Nifty-500 index is down by 0.99 per cent. The Mid-cap and Small-cap indices declined by 1.32 per cent and 0.41 per cent. The VIX is up by 10.68 per cent. The market breadth is extremely negative. About 82 stocks hit a new 52-week high, and 60 stocks traded in the upper circuit. HDFC Bank, ICICI Bank, and Reliance were the top trading counters in terms of value.

The Nifty has formed a big engulfing and an outside bar. After three days of consolidation, Thursday’s move has signalled a fresh breakdown. The Nifty opened above the 20DMA and closed at the previous day’s low. It formed the most bearish candle. It declined by 3.60 per cent from the recent lifetime high in just less than two weeks. The earlier correction was 3.84 per cent in five weeks. We cautioned about this impulsive move earlier. It closed below the 10-week average and 50DMA decisively. Now, the 50DMA entered into a downtrend. The index has registered distribution day today, as the volumes were above average and highest in the last six days.

Today, the sell-off in the broader market and across the sectors indicates more weakness is due. The fall in global markets and the rise in the Dollar index is some of the reasons for today’s fall. We cautioned about the low VIX regime, too. The VIX is broken of the 17-week range. It was up by 20 per cent in the last four trading sessions.

As we stated earlier, the recent high of 20,222 points is the intermediate top. The Nifty must close above 19,767 points decisively with broader market participation to resume the uptrend. The Nifty closed below the prior breakout level and registered a failed breakout. The index also closed below the 61.8 per cent retracement level of the prior uptrend. The RSI is back to near the 40 zone. If it declines below this crucial historical support, the market will enter into a confirmed downtrend. It is better to avoid building new long positions. As long as it trades below 20 and 50DMA, the market will see sell-on-the-rise moves. A short covering bounce may be limited to smaller moves. Be with the trend.

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