Nifty in bear grip; avoid long position deals

THE market failed to sustain the big positive opening. With more and more States imposing curfews and increasing restrictions, the positive opening sentiment did not sustain. The Nifty opened with 167 points gap up but failed to sustain. At the end of the day, it lost 63.05 points and settled at 14,296.40. The Nifty Small-cap-100, Pharma and Auto indices advanced by over one per cent. Nifty IT index fell most by 1.37 per cent.

Banknifty and FinNifty declined by 0.31 per cent and 0.56 per cent respectively. The overall market breadth is positive as there were 1,073 advances and 796 declines. The Nifty breadth is negative as 29 out of 50 stocks declined.

Technically, the Nifty formed a bearish engulfing and bearish belt hold candle today. It once again violated the 14,265 support line and closed above it. The 50DMA started trending down. It is below all short term moving averages. The RSI just hanging on the support for the last two days. MACD histogram shows a further increase in bearish momentum.

The ADX shows the bearish strength as it moved above 25 levels, and the -DMI is forming higher highs and above the +DMI and ADX. Nifty is testing the support several times, but not closing below the support. A close below 14,265 is will signal the stronger bearish trend. As the Nifty is forming lower lows and lower highs and trading below 50DMA, it is a clear downtrend. As the distribution days' count stands at 6, it is also a sign of a downtrend. As long as it is below 14,697 (last week's high) and the 20DMA 14,630, better avoid building the long positions.

(The author is a financial journalist, technical analyst, family fund manager)