Stay on neutral to bearish

If the index sustains below the 20DMA for another 3-4 sessions, expect a sharp decline towards the previous low of 19,457 and 19,233 points

What’s Up

♦ 126-pt gap-down opening

♦ 109 stocks hit a fresh 52-week high

♦ 94 stocks traded in the upper circuit

♦ 55 stocks in the lower circuit

The benchmark indices ended negatively on the weekly expiry day amid high volatility. NSE Nifty declined by 46.40 points or 0.24 per cent and closed at 10,624.70 points. The Nifty Auto index is the top gainer with 0.50 per cent. The Median and FMCG indices gained by 0.14 per cent. The Nifty Metal index is the top loser with 0.88 per cent. The Energy is down by 0.58 per cent. All the other indices declined by less than 0.5 per cent. About 109 stocks hit a fresh 52-week high, 94 stocks traded in the upper circuit, and 55 stocks in the lower circuit. The HDFC Bank, IndusInd Bank, and Bajaj-Auto were the top trading counters in terms of value.

After a 126-point gap-down opening, the Nifty filled the gap in a dramatic recovery. On a weekly expiry day, high volatile moves on both sides trapped traders. The Nifty faced resistance at 20DMA and finally closed below the 50DMA too. It retraced almost 50 per cent of the recovery by end of the day. The MACD has given a fresh sell signal, and the RSI declined below 48. Over 90 points, short covering after 11 am has triggered many stop losses.

As the index closed below the previous day’s low, the price structure favours a bearish bias. Today, it is holding the support of 61.8 per cent retracement level of the recent upswing. It formed another bearish bar in Elder’s impulse system, even after it recovered most of the intraday losses. The last four hourly bars are in a tight range in 70-point volatility. The Stochastic RSI is also declining from the extreme levels. The Bollinger bands contracted further. If the index sustains below the 20DMA for another 3-4 sessions, expect a sharp decline towards the previous low of 19,457 and 19,233 points. We can’t forecast more than this for now.

On the upside, the index must close above the 20DMA of 19671 or today’s high of 19,682 points. If it happens, the index will again test the 19,880 points. As mentioned earlier, the 19,500-233 zone is lifeline support for now. A decline below this support zone will result in a strong and confirmed downtrend. The Nifty is already holding six distribution days and below the 50DMA. Stay on neutral to bearish as long as it trades below the 20DMA. Expect some intraday bounces regularly.

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