Nifty upside up to Budget as overbought state easing
image for illustrative purpose
The stock market closed in a negative zone for the second consecutive day. It failed to sustain at opening highs. The gap up opening did not attract any fresh buying interest in the market. The Nifty ended at 14,137.35 with a tiny 8.90 points loss. But, it fell by 119 points from the day's high.
The Metal stocks continued to be in the limelight. The Nifty Metal index was up 3.82 per cent. The defensive IT, Pharma and FMCG indices were down by over half a per cent. The overall market breadth was positive and in favour of advances.
The second consecutive negative closing and an engulfing candle indicate a pause for the current uptrend. Another close below the opening level with an engulfing bar is not a good sign for the uptrend.
The Nifty once again took support at 5EMA. The short term average began flattening. As we forecasted that the negative divergences are shaping up in all major indicators. Look for a close below 5EMA and below prior bar low and RSI below 70 zone will be a confirmation for the short term counter trend.
This is definitely not a time to go long on the market. The ten days upward swing almost ended. Though the Nifty is making higher openings, it failed to close at a new high. Any close below the 14,108-14,123 will be a short term negative. Further, a decisive close below the 14,046 is negative for the market.
For now, it is better to exit the index long positions and wait for the bearish confirmations. In the recent past, the index failed to get the bearish confirmations. It is wise not to take a bearish view, as long as it does not close below the prior bar.
A fall towards the 20DMA is healthy. We keep advocating the upside is limited until the General Budget. We reiterate that the market will undergo a consolidation. Even if it moves further high, 14,375 is a very strong resistance level in every aspect of technical analysis.
In current volatile conditions, it is advised to avoid short term and wait for a decisive bearish confirmation. The stochastic oscillator is already drifting down from the extreme overbought conditions. On a 75 minutes chart, the 34EMA and the 20 period averages turned down after December 22. This could be an early signal for a retracement toward 20DMA. Stay cautious.
(The author is a financial journalist, technical analyst, trainer, family fund manager)
