Time to be cautious on the upside move

The equity market looks tired for now as it failed to move higher and closed negatively. Nifty moved in the 150 points range with huge swings, finally settled at 17362.10, lost just 15.7 points. Fin nifty, FMCG, Infra and media indices closed in the green with very small gains. The Realty index down by 2.33 per cent, and the IT index is declined by 1.31 per cent. The other sectoral indices declined about half a percent. The overall market breadth is negative as 1,245 declines and 689 advances. About 101 stocks hit a 52-week high, and 81 stocks traded in the upper circuit.

The Nifty formed another bearish candle after hitting another new high. The Hanging Man candle at the swing high is an indication of exhaustion of the current trend. On a 75 minute chart, it the momentum is clearly waning. As expected, the volatility also increased, and higher Intraday swings are back. These swings will increase further in the near term.

The Nifty has formed a lower low candle after August 27. On a 75 minutes chart, the RSI closed below the prior swing is the first negative sign for the index. As mentioned earlier, only a close above the last two days high is positive. In any case, a close below the 17,345-17,287 zone will be a confirmation of the downside retracement.

The +DMI has formed a parallel high. Even though the Nifty is moving higher for the last seven days, the positive directional indicator +DMI has not moved much. It indicates the weaker positive strength in the trend. Importantly, a majority of the stocks' performance relative strength is very weak. The market breadth is not improving even in the bullish moves. For the last two days, Reliance has contributed a majority of the gains. Overall, it is time to be cautious on the upside, better take out the profits from the table and wait for the next leg of the move.

(The author is financial journalist, technical analyst, family fund manager)