Volatile Nifty may trade in limited range
Tuesday’s price action looks like a Shooting Star, as it formed a long upper shadow and closed below opening level; It also closed flat, and higher volumes show profit booking on the rise on Tuesday
image for illustrative purpose
The equities closed flat as the profit booking was on the rise. The NSE Nifty closed with just 2.85 points gain at 19,396.45 points. The PSU Bank index declined by 0.49 per cent and is the top loser on Tuesday. The Bank Nifty and FinNifty closed with 0.02 per cent and 0.10 per cent declines. The IT index is also down by 0.11 per cent. The Nifty Metal, FNCG, and Auto indices are up by over 0.52 per cent. The Midcap-100 and the Smallcap-100 indices outperformed the benchmark indices with 1.10 per cent and 0.81 per cent, respectively. The India VIX was down by 1.78 per cent and closed at 11.74. The market breadth is positive as the advance-decline ratio is at 1.79. About 145 stocks hit a new 52-week high, and 102 stocks traded in the upper circuit. Adani Enterprises, HDFC Bank, and ICICI Bank were the top trading counters on Tuesday in terms of value.
As we suspected, the low-volume bounce failed to get a follow-through day. The Nifty closed flat, and the higher volumes show the profit booking on the rise on Tuesday. This shows Monday’s bounce was due to the profit booking. The index reacted from the sloping channel resistance line. The index closed below the 8EMA after trading above it for a while. Tuesday’s price action looks like a shooting star, as it formed a long upper shadow and closed below the opening level. Now, the Nifty must close above Tuesday’s high of 19,381 points for the trend to reverse on the upside.
The RSI flattened. The MACD line declined below the zero line again. Stan Weinstein’s and Mansfield’s Relative Strength line declined further. It indicates that the Nifty is underperforming compared to the broader market index Nifty 500. Now the 50DMA support rose to 19,334 points, and the 20DMA resistance reached 19,540 points. As we discussed earlier, this is the crucial zone. The KST and the TSI indicators have been in a bearish set-up. The index closed on the 34 EMA on the hourly chart and formed a series of bearish candles. In any case, a decline below 19,370 points is negative, and it can test 19,300 levels, which is a prior parallel and crucial support. As expiry nears, the index may trade in the range with higher volatility. Stay calm and wait for a decisive opportunity on either side.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
