Stay Away From Building Long Positions

On a high volatile day, the equity benchmark indices closed flat to negative. NSE Nifty is down by 18.95 points or 0.08 per cent and closed at 23,688.95 points. The Nifty Oil and Gas index is the top gainer at 1.54 per cent. The IT and FMCG indices were up by 0.60 per cent and 0.44 per cent. The CPSE index also closed with a 0.25 per cent gain. All other indices ended in the red. The Consumer Durables Index, which lost by 2.16 per cent, is the top loser. The Smallcap is down by 1.65 per cent. Healthcare and midcap indices declined by over a per cent. All other indices declined by less than a per cent. The India VIX is down by 1.33 per cent to 14.46. The market breadth is negative as 1,865 declines and 952 advances. About 73 stocks hit a new 52-week low, and 88 stocks traded in the lower circuit. ITI, Reliance, Aegis Logistics, Credit Access, and HDFC Bank were the top trading counters in terms of value.

The Nifty bounced from the trendline support with the help of Reliance, ITC, and TCS. These large-cap and heavyweight stocks bounced from the lows and saved the index from a deep-red close. Just before the earnings, the TCS witnessed a smart rally. The FMCG and IT sectors participated in the recovery. The Nifty took the support at the trend line and rallied by 231 points or 0.98 per cent from the day’s low, and formed a Hammer candle. After a smart recovery from the lows, it failed to close above the 200EMA. The open is almost the day’s high. The index is yet to form a lower low below 23,460 points. In any case, if the index declines below this level, it will form another major low below 23,263. The next reasonable support is at 22,994. In such a case, the index will enter into a serious bearish trend. The Head and Shoulders pattern target and the 100 per cent extension is at 21,843 points. The Nifty will test this level sooner or later if it sustains below the 50DMA. The volumes were a little higher than the previous day. As the fall is limited to 0.08 per cent, the index escaped the distribution day. Though the index closed flat, the market breadth is at 1:2. Few large-cap stocks influenced this session’s move. As the index has not given any reversal signal, it is better to stay away from the long positions.

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