Sideways trading likely
20DMA flattened and is currently positioned at 17893 and it may act as immediate resistance
image for illustrative purpose
The benchmark indices erased almost 50 per cent of the previous day's gains. NSE Nifty closed at 17764.60 with 89.45 points or a 0.50 per cent decline. The Metal index is a top loser with 2.20 per cent. The FMCG, Realty and Media indices gained by more than 0.50 per cent. Nifty Energy and IT indices decline by 0.71 per cent and 0.61 per cent, respectively. The India VIX is up by 2.01. The Open Interest is up by 6.33 per cent on a 0.50 per cent decline day, which shows fresh shorts were built up in the system. The broader market breadth is positive as 1033 advances and 898 declines. About 115 stocks hit a new 52-week low, and 85 stocks traded in the upper circuit. Adani Enterprises, Adani Ports and Reliance were the top trading counters today in terms of value.
The Nifty has formed another inside bar, as it traded within the previous day's range. It also traded mostly within the first hour's range. For the last three days, the Budget day range was broken, and it may break even for the next two days. It closed below the 8EMA and traded in the negative zone during the day. There are no major recovery attempts today.
Volumes were lower today, and the Open Interest data shows fresh shorts were built up in the system. The Nifty breadth is negative and missing the strong leaders to drive the market upside. As stated earlier, the index range will continue within the budget day range for another two days. We can expect a volatile move and range breakout on a weekly expiry day. With a sideways move, the 20DMA has flattened and is currently positioned at 17893.
This may act as immediate resistance. The previous day's high (17870) and the 61.8 per cent retracement level (17877) were at the same level. This confluence of resistance needs to be violated for a bullish move. In any case, the index trades negatively and closes below 17677 is a short-term negative. As mentioned earlier, the Budget day range of 17353-17972 has to be violated for a directional bias. Till then, the sideways action will continue.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
