No Scope For Fresh Short Positions

The equity benchmark index closed negative for the sixth straight session. NSE Nifty was down by 26.35 points, or 0.11 per cent, and closed at 23,532,70 points. The Media index was the top gainer, with 2.26 percent. The Real Estate, Smallcap, and Auto indices gained by 0.66 per cent to 1.03 per cent. On the flip side, the FMCG index is the top loser at 1.53 per cent. The CPSE and the PSE indices are down by 0.92 per cent each. The PSU Bank index has declined by 0.70 per cent. The India VIX is down by 4.28 per cent to 14.77. The market breadth is positive as 1,531 advances and 1,269 declines. About 148 stocks hit a new 52-week low, and 134 stocks traded in the lower circuit. Swiggy, HDFC Bank, Zomato, Reliance and HAL were the top trading counters in terms of value.

The Nifty closed below the 200EMA and 200DMA. On a derivative expiry day, the volumes were lower, and the daily range shrunk to 190 points. It closed below the open and at the previous day’s low. The index formed a long upper shadow Doji candle, showing that the bears are still under control on the market. The rebound soon after opening did not sustain till the end. However, the decline has not been as sharp as in the last two days. In a weekly time frame, the index is approaching the 50-week average of 23254, which is 1.20 percent away. It closed at its lowest in the last 20 weeks. The Nifty fell by over four per cent in the last six days. The index declined in three phases since the September high. The first phase lasted for six days and consolidated for five days. The second was an 8-day decline and consolidated for 8 days. Now, the current decline is on the sixth day. So, expect the consolidation in the next two days. As the long weekend, the traders did not participate much. The Index met the head and shoulder pattern breakdown target and retraced over 50 per cent of the prior uptrend. The next level of support is at 23,253 points, which is the 61.8 per cent retracement level, which is also a 50-week average. The weekly RSI (43.07) is approaching the bearish zone. The daily RSI (29.38) entered into the oversold zone. To overcome the oversold condition, Nifty may end its decline in the next one or two days. Normally, the swings may be sustained after 8-10 days. The index is out of the Bollinger bands for two days, showing an extended fall. It may come into the bands sooner or later. For now, there is a very limited chance for fresh, short positions, and it is risky. Before resuming the downtrend, the index may consolidate for some time. It may retrace the 23890-920 zone of immediate resistance. The Doji candle on the bottom also indicates the end of the fall. A positive close on Monday will signal a reversal for the short term. Stay cautiously optimistic.

(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)