Nifty weighed by bear, could ease out after Union Budget

THE Reliance led market fall closed below the important support levels and signalled troubled times are ahead. The Nifty fell by 3.63 per cent in three days and formed three consecutive big negative bars. After opening with a gap up, it fell sharply, down by 133 points and closed at 14,238.90. A majority of sectoral indices closed in the red. Pharma and BFSI sectors are able to hold the initial gains. The energy index fell by 2.82 per cent as the Reliance down by 5.30 per cent. Pharma index up by 1.71 per cent is the top gainer.

The market breadth is extremely negative as 1,404 stocks closed with losses. As many as 519 stocks gained and 321 stocks closed unchanged. It is interesting to watch the FII figures for this week.

The sell-off continued for the third consecutive day. As we expected market had a pullback in the morning session with a gap up opening. It tested the waters little above the 14,450 as we forecasted and fell sharply. The market made a futile effort to a pullback toward 14,500 levels, and mostly consolidated in the middle session. But the last hour broader market selling pressure was led by the heavyweight Reliance Industries. It fell by 5.30 per cent and contributed most of the index losses. India VIX once again rose by 3.67 per cent. The market breadth is extremely negative. These are the signs of troubled waters going ahead. Interestingly, the Nifty has filled the gap of 11th January and closed below the gap area. It also tested the 18th January low. As I mentioned in yesterday's column that the 14,281 level is very critical support. Now the Nifty closed not below that important swing low support, and it also closed just below the channel support.

The MACD histogram and negative movement indicator -DMI shows an increased bearish movement. At the same time, the RSI has closed below the December 21 major swing low, is very big negative confirmation for the market direction. The Nifty also closed below the short term mean average of 20DMA, which indicates the first sign of bearish bias. As Tuesday is a holiday, there are only two trading sessions for the January monthly expiry. A weekly close below the 14,133 will give further confirmations to the bearishness. With the current price structure, with three strong bearish candles, it is advised to avoid the long positions in the market, if it does not close above the prior day high. Be with a bearish bias till the budget. The budget could be a fresh trigger point for the market direction.

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