Nifty may resume downward move below 19,436pts
The index closed below the last week’s low, which is first lower-low close since March bottom
image for illustrative purpose
The equities bounced and recovered the previous day’s losses. NSE Nifty gained 135.35 points or 0.70 per cent and closed at 19,517 points. The PSU Bank index is the top loser with 0.70 per cent, followed by the Auto index with 0.33 per cent. The Nifty IT is the top gainer with 1.55 per cent. Pharma, BankNifty, and FinNifty gained over 0.80 per cent. All other sectoral indices registered modest gains. The India VIX is down by 5.48 per cent to 10.57. The market breadth is positive as the advance-decline ratio is at 1.90. About 139 stocks hit a new 52-week high, and 87 stocks traded in the upper circuit. Zomato, SBIN, and HDFC Bank were the top trading counters on Friday in terms of value.
The Nifty tested the previous day’s high and closed near to it. Though it recovered 220 points from the Thursday low, the Nifty closed below the last week’s low. This is the first lower-low close since the March bottom. Importantly, the previous week’s inside bar got the confirmation for its negative implications. We expected a bounce on the weekend due to short covering after a sharp decline. The recovery in IT, Pharma, and Private Banks helped the Nifty to close positively. Friday’s move is just a retracement or a pullback effort after an impulsive decline. The positive aspect of this bounce is that, the index closed and went back into the rising channel. Friday’s low of 19,436 points is the crucial support to sustain the channel.
The RSI is still below the 55 zones, and the MACD Histogram declined further, indicating that the weakness persists. The weekly histogram also declined for the second consecutive week. Currently, the 20DMA is at 19,626 points and can be tested in the next one or two days, if the bounce continues. The Anchored VWAP resistance is at 19,684 points, which may act as the next resistance. In any case, if the index declines below 19,436 points, the downward move will resume and can test the 50DMA of 19,139 points. We can’t forecast more than this for now. As the index made a lower low and lower high bar on the weekly chart, it is better to be cautious and stay with a stock-specific activity.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
