Time to take a break from trading

NSE Nifty registered its highest decline in the past four days. It declined by 21.605 points, or 0.95 per cent, to settle at 22,488.65 points. The Metal, IT, and Pharma indices dragged the market down by 3.01 per cent to 1.85 per cent. Only Bank Nifty and Medi indices were up by 0.37 per cent and 0.48 per cent, respectively. All other indices were down by over a per cent. The Market breadth is extremely negative as 1,896 declines and 703 advances. About 57 stocks hit a 52-week high, and 110 stocks traded in the lower circuit. HDFC Bank, IRB, Mazdock Shipbuilders, and Reliance were the top trading counters on Thursday, in terms of value.

The Nifty registered a fourth consecutive declining day, with two added distribution days. It closed below the rising channel’s mean level. It tested the declined below the 20DMA support and 50 per cent retracement level of the prior upswing, and finally closed above them with a short covering in the last 15 minutes. Normally, the counter-trend moves end at 50 per cent retracement levels. The 61.8 per cent retracement level (22,313) is the strongest support. A decline below this level confirms the downside move. As the index has been trading in the rising channel since January, either side breakout will result in impulsive moves. Now, the channel support is placed at the 22,050-200 zone. For the next four trading sessions, this strong support zone is critical. In any case, if it closes below this zone of support, the Nifty will test 21,700 and 21,480.

The Nifty declined by 693.80 points or three per cent from Monday’s all-time high. This impulse falls before the fall because of nervousness about the direction. Last week, it gained all trading sessions; this week, it reversed with all declining days. The MACD line is about to cross under the single line. Any further decline will give a bearish signal. The RSI declined below 50, which is negative. The Commodity Channel Index is approaching the zero line and shows the short-term high is made at 23111.80. For an upside move, the Nifty must close above the 22,618-705 resistance zone. Above this, the index will be positive and can form a new high.

But there are only two trading sessions before the event risk. The market is experiencing heightened volatility, which may make technical and fundamental analysis less reliable. Consider taking a break from trading for the next few days to allow the market to stabilise. This can help you avoid making impulsive decisions and give you time to reassess your strategy.

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