Persistent lows point to longer bear rule on Nifty
However, for the last six weeks, the bears failed to pull down Nifty below 14,265
image for illustrative purpose
THE market closed positively today with a smart recovery from the day's low. The Nifty opened with a 77 points gap down and recovered soon after. From the day's low, gained 255 points and finally closed at 14,385 with 92 points gain. On a weekly basis, it lost 191.4 points in the last four trading sessions. Barring NiftyIT, Pharma and FMCG all the sectoral indices closed with a positive bias.
FMCG index lost 0.74 per cent. The Banknifty the highest gainer by 2.15 per cent and the FinNifty by 2.13 per cent. Metal, Realty and the Media indices were up by over one per cent. The overall market breadth is positive as1,126 advances and 745 declines were recorded. India VIX is up by 2.68 per cent and reached above the 23 levels. Since the last weekly expiry, the VIX is up by 10.22 per cent from 20.89 to 23.02. This shows the increased volatility in the market.
The Nifty formed a piercing candlestick pattern, which has bullish implications. Suppose the Nifty able to move above 14,560, the market turn in the short term. The Nifty has broken the long channel support line drawn from March 2020 low and 20 weekly average. It is also in the formation of another indecisive candle on a weekly chart. Importantly, the short to medium-term trend indicator, 50DMA, began to trend down. Simultaneously, for the last six weeks, the bears are failing to pull down the Nifty below 14,265 on a closing basis. It tested at least six times during this period. It breached the 14,265 levels, all three trading days in this week. It is also forming lower lows.
On the daily chart, the RSI bouncing from the trendline support but below the 9-period average. With today's move, none of the indicators turned positive or have given bullish signal. The rally may be because of short covering as weekly derivatives expiry arrives. The ADX is still above the 25 level, and +DMI has not gained on a positive day. These signs signify the index is clearly lagging on strength. Even the stochastics oscillator did not turn positive. Interestingly, the benchmark index is still below the shorter period average of 5EMA.
After September 2020, the Nifty is about to make a monthly low. There are several bearish patterns and indications available in the current structure. First, during March 2021, it made a monthly lower high, and April 2021 seems to be following it up with a monthly lower high as well as a lower low, though the month has another week to pass. I am cautious in the market as this structural change looks significant after a year-long uptrend.
(The author is a financial journalist, technical analyst, family fund manager)
