Stay Away From Building New Positions

The equities nosedived with a renewed selling pressure. The Nifty declined by 257.85 points or 1.07 per cent and closed at 23883.45. The Nifty IT is up by 0.05 per cent, and Realty gained by 0.18 per cent. All other sectoral indices closed negatively. The PSE is the top loser with 2.41 per cent, and CPSE is down by 2.08 per cent. The Nifty Next is down by 2.18 per cent. The Auto, PSU Bank, FinNIfty, and FMCG are down by over 1.5 per cent. All other sector indices declined significantly. The India VIX is up by 2.24 per cent to 14.59. The market breadth is negative as 2117 declines and 674 advances. About 61 stocks hit a new 52-week low, and 123 stocks traded in the lower circuit. HDFC Bank, ICICI Bank, ITI, Reliance, and Triveni Turbine were the top trading counters, in terms of value.

The Nifty declined sharply and closed below the previous day’s low. It almost tested the previous parallel lows. The index registered its lowest close after 26th June this year. It formed a bearish engulfing candle with low volume.

As it closed near the 13-day consolidation support, a breakdown will result in a further sharper decline. On a line chart, the index has already broken the consolidation. The index closed below 23893, which is the 5th August swing low. The 23816, another low formed on 4th November, is the immediate support. A close below this support is further negative for the market. It will test the 200EMA of 23542 faster than expected. Before this, the index may take support at 23651, which is the head and shoulders pattern target. Watch the price behaviour around the 23542-651 zone. The current consolidation breakdown target is much lower at 23141. On the upside, the index must close above the prior day’s high to continue the consolidation. A close above 24480 will be positive, and it can reverse the trend in the near term. The RSI declined to 34.82 and failed to enter into the neutral zone. The MACD shows increased bearish momentum after four days of lull. With this fall, the bears are back into the fray with renewed energy. As the blue chip companies declared disappointing earnings, the market is becoming weaker and weaker. Wait for the dust to settle and wait for Q3 earnings. Stay away from building new positions.

(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)