VIX above 14 level indicates surging volatility
For the second day, NSE Nifty was holding the 20DMA support, forms another lower low and lower high candle; Further drop in RSI and the MACD histogram shows pick up in downside momentum
image for illustrative purpose
Equities continue to trade in the zone for a prolonged period. NSE Nifty declined by just 17.90 points and closed at 17826.70 points. The PSU Bank and Realty indices were the top losers, with 1.79 per cent and 1.20 per cent, respectively. The Nifty IT and Media indices are down by 0.88 per cent and 086 per cent. The Energy index is up by 0.4 per cent. FMCG and Infra indices closed with 0.11 per cent and 0.17 per cent gains. All other indices ended in the negative zone. The Market breadth is negative as 1213 declines and 722 advances. About 151 stocks hit a new 52-week low, and 68 stocks traded in the lower circuit. Reliance, HDFC Bank, and ICICI Bank were the top trading scrips on Tuesday in terms of value.
For the second day, the Nifty was holding the 20DMA support. Traded in 125 points range and formed another lower low - lower high candle. Opening positive bias did not sustain. Fresh shorts were built up in the system. The Nifty closed below the moving average ribbon, and the MACD is already in the below zero line, which shows a bearish bias. The negative breadth in the index as well as the broader market, shows inherent weakness.
Except for the PSU Bank index, which declined by 1.79 per cent, no other index closed with more than half a per cent on either side. This shows a lack of traders’ participation in the market. The VIX crossed the 14 level, indicating the probability of an increase in volatility. Even though the Nifty closed with a tiny loss, the price structure is damaged. On a weekly chart, it formed a bearish engulfing candle in the first two days of trading. The RSI and the MACD histogram further declined and show the momentum has picked up on the downside. The hourly moving average ribbon acted as a resistance for the day. As of now, no indicator is in the oversold condition, and no divergences are visible. As the February monthly derivatives series is expiring in the next two days, the costly option premiums indicate higher volatility. Trade with strict stop losses, as the intraday spikes may hurt your positions.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
