Nifty back below 200EMA/ 200DMAs

The index formed 2 big high volatile candles of 2.5% intraday move above the 100DMA; Friday’s massive volume decline is a caution for the bulls; Nifty may bounce for a day or two, but may not sustain

Theequity indices suffered significant losses last week. NSE Nifty declined all five trading sessions in the week and registered a 4.77 per cent fall. BSE Sensex is also down by 4.98 per cent. The Nifty Midcap and Small-cap indices were down by 3.53 per cent and 3.57 per cent, respectively. Only the Nifty Pharma index was positive by 1.55 per cent, and all other sectoral indices declined. The Nifty Metal index is the top loser at 6.63 per cent. The other sector indices succumbed by 5-6 per cent. The Market breadth is extremely negative. The FIIs turned sellers again. They sold Rs4,121.22 crore, and the DIIs bought Rs16,546.41 crore worth of equities.

The Nifty is back to below 200EMA and 200DMAs. It erased almost the previous four week’s gains. The fall is sharper than the October first week’s fall. It posted the biggest fall in two years. As we suspected, the counter-trend rally ended at a 50 per cent retracement level. It failed to form a higher high. Friday’s massive volume decline is a caution for the bulls. The index may bounce for a day or two, but may not sustain. Importantly, the Nifty is back to the 50-week support. Earlier, it bounced from this long-term support, which is currently at 23,530. Before failing to sustain above the 100DMA, the index formed two big high volatile candles of 2.5 per cent intraday move. These two candles and the five days of consolidation between these candles look like a double-top pattern.

(The author is partner, Wealocity Analytics, Sebi-registered research analyst, chief mentor, Indus School of Technical Analysis, financial journalist, technical analyst, trainer)