Wait for clear market direction for aggressive bets
For at least the next two to three weeks, stay light on position size and avoid aggressive leverage positions. Focus on stronger stocks to take moderate positions
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The domestic markets failed to move higher in a truncated week. The Nifty declined by 59.75 points closed at 17829.20. The Nifty Realty index is the top gainer with 1.94 per cent. Metal, Infra and Energy indices closed with little over 0.50 per cent each. The Banknifty, Auto and Media indices declined 1 to 1.5 per cent. Broader indices Nifty Midcap-100 declined by 0.27 per cent and Smallcap-100 index down by 0.66 per cent. Overall market breadth is negative as 1140 declines and 885 advances. About 93 stock hit 52 week high and 143 stocks traded in the upper circuit.
The Nifty has formed a perfect doji candle and an inside bar on a weekly chart. It took as support at a 10-week average. But it closed below the prior day low, and formed minor swing highs at 18342 and 18012. These levels will act as immediate resistance. It also formed minor swing lows at 17968 and 17613. With this price structure, the minor trend is the downside. For the last three days, 34EMA working as strong support. The 50 DMA support is at 17648. For the near term, the 17613-648 cluster will be a very crucial support. The 38.2 retracement of the rally from the July 28, low is at 17423. During February-April, the Nifty retraced by 61.8 per cent of the prior intermediate upswing. The current retracement is also a little over the 61.8 per cent retracement level. In this scenario, next week's market move is critical and will be a decisive trend signal. In any case, the index fails to form a higher high, and it can test the 17423 sooner or later. The negative market breadth the chances of consolidation for at next 3-4 weeks. Currently, the Nifty has had five distribution days in the last 45 days. Any increase along with closing below the 50DMA will change the market structure as an uptrend under pressure. Two distribution days will expire next week. The RSI declined below 50, and the momentum is not at all positive for now. The negative momentum indicator -DMI is above the +DMI and about to crossover; the ADX is not a good sign for the market. The Mansfield Relative Strength is below the zero line indicates underperformance. Currently, it is better to wait for a clear market direction. For at least the next two to three weeks, stay light on position size and avoid aggressive leverage positions. Focus on stronger stocks to take moderate positions.
