Nifty forms Double Bottom candle

Slightly Positive Mkt Breadth

• 1,343 advances

• 1,257 declines

• VIX is up by 1.50%

• 170 stocks in upper circuit

• RSI forms a positive divergence

• About 42 stocks hit a new 52-week low

The frontline indices closed flat to positive on Monday, with an increased volatility. NSE Nifty gained by 32.35 points or 0.15 per cent and closed at 22,055.70. The Nifty Metal index is the top gainer with 2.49 per cent. The Nifty Auto and Media indices are also up by 1.26 per cent and 1.15 per cent. On the flipside, the Nifty IT index is down by 1.64 per cent. The FMCG is down by 0.46 per cent. The Smallcap and Midcap-100 indices also declined by 0.57 per cent and 0.39 per cent, respectively. The India VIX is up by 1.50 per cent to 13.89. The market breadth is slightly positive as 1,343 advances and 1,257 declines. About 42 stocks hit a new 52-week low, and 170 stocks traded in the upper circuit. Tata Steel, JioFin, HDFC Bank, and Tata Power were the top trading counters in terms of value.

The benchmark index bounced after a slide below the prior day’s low. The bounce with low volume and negative breadth may not be sustained for long. The 50-DMA has been acting as strong support for the last four trading sessions and is still within last Wednesday’s range. The Nifty also failed to close above the 50 per cent retracement level of Wednesday’s range. The index is struck between 20 and 50DMAs. Interestingly, the benchmark index formed a base at the 21,860-21,931 zone for the last 17 trading sessions. The bounce after two hours trading is with low volume, majorly due to short-covering. The index is retraced by 38.2 per cent of Monday’s bounce.

On an hourly chart, the index has formed a double bottom candle, and the RSI has formed a positive divergence. This may result in a short-term bounce, which is already evident. The question is, will it sustain above the 22,142-216 zone of resistance? Even if it crosses this zone, the index has to come out of last Wednesday’s range, which is 21,905-22,447. A breakout on either side of this range will give a directional bias. The index may consolidate for another 2-7 days before breaking out of the range. There is no short opportunity as long as the Nifty trades above 50DMA. Be neutral for now, and apply neutral strategies.

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