Nifty's MACD line signals bearish cues in market
On the other side, index’s strength still intact as all other times frames are out of any weakness
image for illustrative purpose
The IT sector stocks dragged the market with disappointing TCS results. The benchmark index Nifty close with a minor loss of just 4.60 points, settled at 16216. The Nifty IT index is down by 3.08 per cent. The Nifty Metal is the top gainer with 1.97 per cent, as positive news flow. The realty and auto indices are up by 1.47 per cent and 1.05 per cent respectively.
All the other sectoral indices gained by less than one per cent. The market breadth is positive as about 58.5 per cent of the stocks closed positively. About 40 stocks hit a new 52-week high, and 106 stocks traded in the upper circuit. TCS, Adani Green and Reliance are the top trading counters in value terms.
The Nifty has ended with minor losses after a smart recovery from the opening low. The recovery in metals and auto stocks has led the market intraday rally in the afternoon. The Nifty is still trading below the Friday high.
The Open Interest shows that there are fresh shorts in the market. Even though there are no divergences visible, the index is hesitant to take a decisive path. It came into the Bollinger bands. The RSI is flat, and MACD has reached a near-zero line. Only the Stochastic oscillator shows the extreme overbought condition and the possibility of profit booking.
On a 75-minute chart, the MACD line below the signal line is a bearish signal. Other than that, Nifty does not show any other weakness in any time frame. As the index recovered from the lows, the strength is still intact.
The actual concern is, still, that majority of Nifty 50 stocks are in the weakening and lagging quadrant and showing less Relative Strength momentum. Even a majority of sectoral indices also need to pick up their relative momentum.
There are only three sectors in the leading quadrant. As mentioned earlier, Friday's high is crucial for an upside move or the continuation of the counter-trend. At the same time, a close below the prior day's low is a negative for the market.
