Uncertainty prevails in stock markets

Uncertainty continues to prevail in the market. On Tuesday last week, the market tried to bounce back faster, but it is still within the range of October 2018 high and lows as there is no follow-up buying actions. However, Nifty managed to end 111.95 points higher.

But the broader Nifty Mid-cap and Small cap indices could inch marginally up by 0.8 and 0.4 per cent respectively. On Friday, Reliance and Wipro rescued the market. But the market breadth is still not improving. Though the market ended in green, market breadth continued to be negative, with 1230 stocks ending in red. Only 519 stocks were able to end on a positive note. 

Technically, Nifty is still in a sideways movement, and a series of the indecisive candles are forming. Since the Nifty is not making any lower low, we can’t short the market and on the upside, it is still attempting to make a significantly higher high. As long as Nifty unable to make at least two higher highs, we cannot be aggressive on the long side. The medium trend indicator, 50DMA is acting as strong support and it is also trending upside.

So, the only worry is lack of buying interest among investors. Volumes have constantly been decreasing in last three months. It shows that investors are worried about the market direction.

After Tuesday’s faster retracement, there were three bearish formations, not a good sign for the market. The stochastic oscillator reveals that there is a chance of Nifty testing 10,750-10,775 level again this week. The range indicator Bollinger Bands further narrowed which means early signs of a reversal in near future. Nifty added another distribution day. 

As we discussed last week, additional one or two distribution days indicate downward direction. As the market is in an Uptrend Under Pressure, investors should proceed with caution. Unless a stock shows exceptional fundamental and technical strength, no new addition to the portfolio is advised. (The author is a financial journalist and technical analyst. He can be reached at tbchary@gmail.com) 

By T Brahmachary