Time to book profits

The 15,900 level has become a very strong resistance for the Nifty. Unless it clears this resistance, we can't be so bullish on the market direction. Sustaining below the 20DMA for the second consecutive day is a short-term weaker sign

The domestic stock market declined for the fourth consecutive day. The Nifty closed at 15,680 points with a loss of 41.50 points. The Pharma, Auto and FMCG sectoral indices up by 0.40 per cent to 0.93 per cent. PSU Bank index is also gained by 0.13 per cent. All other sectoral indices declined by less than half a per cent. About 180 stocks hit a new 52 week high and 144 stocks traded in the upper circuit.

The market is finally showing decisive weakness during this week. It formed a most bearish candle today. The NSE Nifty lost 50.90 points and settled at 15672.15 points. For the last two days, the breadth is negative. After a long time, four red candles in a row show that the bears are getting some strength. The Nifty struggled around 15,900 level, failed to close above it. On Monday, the Nifty opened at a new lifetime high of 15,915.65 points, failed to sustain the opening gains, and formed a bearish engulfing candle. Since then, the Nifty gradually drifting downside. It lost 110.45 points or 0.67 per cent in the last four trading sessions. With an added distribution day today, the total distribution day count is now at five. Any increase in distribution days will change the market condition to a downtrend.

The 15,900 level has become a very strong resistance for the Nifty. Unless it clears this resistance, we can't be so bullish on the market direction. Sustaining below the 20DMA for the second consecutive day is a short-term weaker sign. During the last one month, it traded in a little over 200 points range between 15,900-15,670 zone. Today, it closed at the critical support level. This indecisiveness at the higher levels, on low volatility and low volume, indicates a probable intermediate top at 15,916 points. A close below 15,670-15,600 zone will be a first warning signal for the bulls. There are evident negative divergences on weekly and daily charts. The momentum is picking up on the bearish side. The Elders impulse system has given a bearish signal. Even Pring's KST has given a sell signal during the week. The current price structure suggests, there is little scope for an upside move beyond 15,900 points. The aggressive shorts can be built if the Nifty closes below 15,600 points. The next support is at 15,431 points. A close below this level will have very decisive bearish implications. Take out the profits from the table for now.

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