Weekly RSI About To Enter Bearish Zone

A series of negative news flows dampened the market sentiment. The market is under bear grip with broad-based selling pressure. The SEC’s warrant against the Adani Group dented the market sentiment. NSE Nifty declined by 168.60 points or 0.72 per cent and closed at 23,349.90. The Realty and IT indices gained by 0.93 per cent and 0.49 per cent, respectively. The PSU Bank index is the top loser at 2.40 per cent. The Metal, Energy, and Commodity indices declined by over two per cent. All other sector indices are down significantly. The market breadth is negative as 1991 declines and 827 advances. About 160 stocks hit a new 52-week low, and 132 stocks traded in the lower circuit. Adani Ports, Adani Enterprises, HDFC Bank, Reliance, and SBI were the top trading counters in terms of value.

The SEC’s bribe case against Adani Group rattled the markets. The index stocks Adani Enterprises and Ports and Reliance have dragged the Nifty by over 115 points. The Nifty closed below its prior low and tested the 50-week average, and it closed below the 200DMA and 200EMA for the fourth consecutive day. The index recorded the highest volume after 3rd October and registered another distribution day. The index is now 5.86 per cent below the 50DMA. The Nifty has breached all long-term averages and is in a decisive downtrend. The 200DMA is also flattened, which indicates that the uptrend has completely stalled. A series of negative news fuelling the bears. First, the Ukraine Missile attack on Russia, then the bribe case against the Adani Group. The next news that can influence is Maharashtra, and Chattisgarh state assembly election results may influence the market.

The daily RSI (28.34) further declined, below the prior lows, and the weekly RSI is about to enter the bearish zone. On a lower time frame, the hourly RSI has formed a positive divergence and may lead to a small pullback. The MACD shows a strong bearish momentum. After the sharp decline in the first hour, the index consolidated in a tight range. As the index formed a fresh low, it required a close above the prior day’s high with a higher volume for a pullback rally. A decisive close above the 200DMA of 23583 will be positive and enter the counter-trend consolidation. If session’s low of 23263 is protected, the index can test the 200DMA. Still, there are no possibilities for it to go long. The index may rally intermittently but may sustain at higher levels. Let the index form a base to reverse.

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