Stock-Specific Trading May Continue

The week began with a highly volatile day as the benchmark index moved low to high and high to low swings. The Nifty ended flat to negative as it is down by just 6.90 points and closed at 24141.30. The Nifty IT index is the top gainer with 1.28 per cent. The Banknifty, PSE, FinNifty and Private bank indices gained over 0.50 per cent. On the flip side, the Healthcare index is the top loser at 1.50 per cent. The Media, Smallcap, and Metal indices are down by over a per cent. The India VIX is down by 1.38 per cent to 14.27. The market breadth is negative as 1,949 declines and 895 advances. About 63 stocks hit a new 52-week high, and 117 stocks traded in the lower circuit. ITI, Tata Motors, Asian Paint, and HDFC Bank were the top trading counters in terms of value.

On a 332-point volatile range, the Nifty has formed an outside bar and closed with a flat to negative bias. It opened with a negative gap and recovered sharply with the help of banks and financials. It formed a long upper shadow candle, which indicates the profit booking at higher levels.

The index closed below the 8EMA for the third straight day and formed a shooting star candle, which is bearish. Since the beginning of the current downtrend, Nifty has been able to close above the 8EMA for only one day. It acted as strong resistance. The volumes were lower than the previous day and declined for the third day. The RSI hovered around 40 but failed to close above it. The MACD histogram is almost zero for the last 4 days and shows no momentum. The index has taken support at 150DMA for the third time in the last six days. In any case, a close below 24,019 is negative and can test the prior low of 23,816. As the index is forming lower lows for the last three days, it is important to protect the first higher low of 23,842. Otherwise, the index will decline sharply towards the 200EMA. Stock-specific activity will continue. The BFSI and some of the IT sector stocks are building momentum. Stay focussed on the better relative strength and momentum stocks.

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