Wait for shorting opportunities
Nifty formed a long-legged small body candle; If the Nifty is able to close above 17591, it can test 17,777 level, which is 20DMA
image for illustrative purpose
The equity indices closed lower for the fifth straight session. NSE Nifty ended at 17,511.25 points with 43.05 points or 0.25 per cent decline. The Bank Nifty closed flat with just 5.65 points gain. The Nifty Metal and FMCG indices gained by 0.35 per cent and 0.26 per cent, respectively. PSE and CPSE indices closed in positive territory. The Realty and Media indices declined by 1.77 per cent each. The Energy and Infra indices are down by 0.52 per cent. All other indices closed with less than half a per cent decline. The broader market breadth continues to be negative as 1107 declines and 822 advances. About 192 stocks hit a new 52-week low, and 61 stocks traded in the lower circuit. HDFC Bank, ZEEL, and Adani Enterprises were the top trading counters on Thursday.
The Nifty sustained below the 200EMA for the second day. The efforts to move above this crucial average have failed. Due to expiry short-covering, the Nifty bounced 166 points in the first 45 minutes of the trade. After this massive surge, the index traded in a tight zone for five hours. But during the last hour of selling pressure, after the expiry trades were over, it declined sharply by over 70 points in just a few minutes. Importantly, with the last two days of fall, the 200EMA also entered into a fresh downtrend. This is a big negative for the market direction. Today is the fifth day of negative closing and the sixth day of bearish candle formation.
This is the longest streak of declines since December 1. It may try to recover with a bounce toward 200EMA (17591). As the Nifty has formed a long-legged small body candle, a positive close tomorrow will hint at the recovery rally. If the Nifty is able to close above 17591, it can test 17,777 points, which is 20DMA. But on the downside, the 200DMA of 17,361 points is the last hope of support. If the monthly close is below this level, it will confirm the downtrend, and it can retrace up to 61.8 per cent (16598) of the prior uptrend. Before this, in the 17035-282 zone, it may try to consolidate for the period. From now, the counter-trend rallies may extend up to 50 per cent of the down move. From now, it is wise to wait for good shorting opportunities rather than buying opportunities.
(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)
