Nifty In A Strong Bearish Bar

The equity indices tumbled and broke below key levels. NSE Nifty declined by 364.20 points or 1.52 per cent and closed at 23,587.50. All the sectoral and thematic indices were deeply negative. The Realty index is the top loser with 3.91 per cent. The Midcap index is down by 2.82 per cent. The PSU Bank, and IT indices down by 2.65 per cent, and 2.63 per cent, respec-tively. A majority of indices down by over 1.5 per cent.

The VIX is up by 3.84 per cent to 15.06. The market breadth is extremely negative as 2,267 de-clines, and 535 advances. About 74 stocks hit a new 52-week high, and 86 stocks traded in the lower circuit. Zomato, ICICI Bank, IGIL, JSW Steel, and Kotak Bank were the top trading coun-ters, in terms of value. The index sharply declined for the fourth consecutive day and erased all the gains of the last four weeks in just five sessions. It is back to 50-week support again. It declined by 1040.20 points or 4.20 per cent during the last week.

The index is now below the 200 DMA and 200EMA, the long-term supports. The Nifty formed a strong bearish bar after the first week of October and registered the highest weekly fall. The index has added a distribution day. The last fall with the highest volumes shows that the selling pressure was intensified. The weekly vol-umes were also higher than the last week. The RSI has entered into the bearish zone. The week-ly and daily MACDs show an increased bearish momentum.

The market breadth was extremely negative, as the broader market also weakened. In any case, a close below the 23,530-263 zone of support will lead to further selling pressure. It may test the 22,350 sooner or later. In the worst-case scenario, the index may test the 4th June low of 21,281. The index must close above the 50DMA of 24,325 to resume the upside journey. Otherwise, every bounce may attract fresh selling pressure. As the outperformance of Small and Micro-caps also ended, it is better to avoid building portfolios now.

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