Nifty hovering in directionless mode

The domestic equity market traded on a very dull note with a low volume. NSE Nifty closed positively by 38.1 points or 0.21 per cent at 18,601.50 level. The Nifty IT is the top gainer with 1.51 per cent gain. The Realty and Media indices also gained by 1.41 per cent and 1.13 per cent, respectively. Bank Nifty, FinNifty and Pharma indices closed with small losses. The other sector indices closed positively. The Advance-Decline Ratio is at 1.60. About 119 stocks hit a new 52-week high, and 77 stocks traded in the upper circuit. HAL, HDFC Bank, and GoColours were the top trading counters on Monday in terms of value.

The benchmark index, Nifty, has formed an inside bar. It also formed a Doji candle. The indecision at near new high is continuing. On a low volume day, IT stocks contain the decline. As the index formed an inside bar, there are no trend change implications for the day. The trading range shrunk to 104 points, and it traded within the first hour’s range, in fact it moved in the first 15 minutes range. In the directionless markets and with low volatility, traders felt difficulty in finding the trades. Few stocks-specific activity is limited to IT and select Mid-cap and Small-cap stocks. Even the Bank Nifty also traded in the first hour’s range. The momentum has completely waned.

The RSI declined into the neutral zone from a strong bullish zone. The MACD histogram shows an increase in bearish momentum. Though the index not formed a lower low on Monday and closed with a gain, it needs to close above Friday’s high of 18,677pts. Otherwise, it has more chance of breaking down. It closed above the 8EMA, which is short-term support; this is the first positive sign on Monday. The second, the market breadth, has improved on a dull day. The index needs a strong breakout with volume and better breadth. Let us hope the market will get the positive trigger points for a breakout. In any case, if it declines below the 20DMA 18,464pts; we may see a weak market scenario.

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