Selling pressure keeps Nifty down

The stock market nosedived below the key support of 50DMA. After opening on a positive note and oscillated in a 370 points huge range with extreme volatility, it fell sharply below 13600 levels. Finally, it closed at 13,634.6 with 182.95 points or 1.32 per cent loss. The Banknifty is resilient to fell and closed in a positive for the second day with 0.68 per cent gain. Financial services index also closed positively with 0.36 per cent up move. All the other sectoral indices ended up with losses. Auto, IT and Nifty Next 50 indices fell by over 2 per cent. The Market breadth is negative as 1,022 stocks declined, and 858 stocks advanced. The Nifty registered another distribution day, and the trend is under pressure.

The Nifty fell sharply for the sixth straight day. After opening with gap up, it did not sustain at the higher levels. It corrected 1,156 points from the lifetime high. Interestingly, the Nifty formed a bearish shooting star candle on a monthly chart. The prior tops in 2008, 2011, and 2020 also formed bearish candles before they entered into a bear phase. The only difference is, earlier it formed bearish engulfing and this it is a shooting star.

Unless there are very surprising pro-market proposals in the budget, any rally will be a selling opportunity. The Nifty closed below the 50DMA, after October 1. This is the first sign of the beginning of the down trend. On a daily chart, the Nifty also formed a bearish engulfing pattern. As we forecasted yesterday, it exactly retraced 23.6 per cent of the last five days fall. It tested 13,960 levels and fell sharply. During the day, it witnessed around short squeeze and traded in positive territory for a short period. In just five minutes, Nifty saw a sale of 13.85 lakh shares, and as a result, it fell from 13,847 to 13,670. This is not a normal activity.

The volatility index India VIX closed above 25 levels after 16th July. This indicates a series of stormy sessions ahead. The RSI closed below the historical support of 40. The momentum indicators showing the bearish momentum is at a faster pace. The 200DMA support is 18.16 per cent away from the current levels. The Anchored VWAP resistance is at 14,128-162 zone. Unless, the Nifty moves above this zone of resistance decisively. It is better to avoid bullish bias.

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