Price Action Indicates Narrow-Range Consolidation

In a volatile day, the indices closed flat. NSE Nifty ended at 22,470.50 with 27.40 points or 0.12 per cent decline. The Private Bank index, Healthcare, and FinNifty gained by over half a per cent. The Auto, Bank Nifty, and Pharma indices gained by 0.45 per cent, each. On the flipside, the Nifty IT index is the top loser with 2.91 per cent. The Realty, Meida, PSU Bank indices declined by over one per cent. The India VIX is down by 2.70 per cent to 13.69. The market breadth is negative as 1,830 declines, and 993 advances. About 234 stocks hit a new 52-week low, and 160 stocks traded in the lower circuit. IndusInd Bank, BSE, Infosys, Bajaj Finance, and Bharti Airtel were the top trading counters in terms of value.

The Nifty recovered from the day’s low for the second successive day. It formed a Hammer candle and closed below the open. It closed above the 8EMA. The volumes were higher than the previous day. The recovery led by two heavyweight stocks, HDFC Bank, and Reliance. The ITC, Kotak Bank, and Tata Motors also participated in the recovery. The index failed to close above the prior day high and erased previous session’s positive bias. It escaped the distribution day, as the decline is limited to less than 0.25 per cent. The index came closer to the 20DMA, and almost completed the mean reversion. The last five days of price action indicate consolidation in a tight range. The 20DMA is currently at 22,619, which is the key resistance. And the Monday’s high of 22,677 is another resistance. If the index closes above this resistance zone, expect the index to test the 50DMA of 23,079 points. The RSI is flat and hovering around the 40 line. The MACD histogram shows lack of momentum. On the downside, Tuesday’s low of 22,314 is the immediate support. So, the 22,314-677 is the crucial zone for the near term. Either side breakout will be an impulsive move. So, stay cautious on both sides.

(The author is partner, Wealocity Analytics, Sebi-registered research analyst, chief mentor, Indus School of Technical Analysis, financial journalist, technical analyst and trainer)