Investors wary of indecisive trading

After advancing for four consecutive weeks, the benchmark index NSE Nifty took a breather this week. It lost by 160.50 points or 0.85 per cent. Though the Nifty failed to hit a new lifetime high by just one point, BSE Sensex hit a new all-time high. But, at the end of the week, it lost by 0.64 per cent last week. The Smallcap-100 index outperformed by a 1.47 gain. The Midcap-100 index declined by 0.98 per cent. Only the FinNifty gained by 0.3 per cent, and all the sectoral indices closed lower during the week. The Nifty Media and Metal indices were the top losers, with 3.6 per cent and 3.1 per cent, respectively. The Dalal Street’s benchmark index BSE Sensex hit a new high last week.

The other frontline index Nifty-50 missed it by just one point. In the bull case scenario, if the Nifty moves above 18,887pts, as we mentioned earlier, the targets are placed at 19,118pts and 19,455pts. To achieve these short-term targets, the Nifty should not decline below the previous week’s low of 18,647pts. This 230 points range is very crucial for the market direction on the upside. Because several bearish candlestick patterns have failed in recent times, we must wait for confirmation of the current bearish pattern.

On a daily chart, the Nifty broke below the recent minor low and closed below the 20DMA, which is negative in the last week. It also registered a rising wedge pattern, decisively with higher volumes and distribution days. It also registered a failed breakout of a flat base. A spurt in VIX, along with volume, will increase the probability of a sharp decline.

On the indicators front, the daily RSI shifted its range to a neutral zone from a strong bullish zone. It gets the confirmation for bearish divergence by closing below the previous swing lows. Even on the weekly chart, this leading indicator shows signs of weakening. The daily MACD is also declined much below the signal line, showing an increased bearish momentum. As we mentioned last time, the Commodity Channel Index (CCI), which indicates the market’s short and long-term cycles, showed the intermediate top much earlier, two weeks ago.

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