Nifty50 extended its losses for the fourth straight session to close at 23,951 on Thursday. Taking cues from the global market, the index started the day with a gap-down open at 23,877.15 and traded sideways within a narrow range of 24,870.30-24,004.90. After hitting an intraday low of 24,870, the index pared some of its losses to close at 23,951.70.
The widespread decline was mainly caused by the US Fed’s aggressive stance on interest rates. Except Pharma, all major sector indices closed lower. The ratio of progress to decline favored the decliners and remained around 1:2.
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The index breached Friday’s low of 24,180. According to the polarity principle of technical analysis, it has remained below 24,000. The momentum indicator, the 14-period relative strength index (RSI), has moved lower, falling to 40. Another technical indicator, moving average convergence/divergence (MACD), has also turned negative.
According to O’Neil’s market management methodology, the current market status is a ‘rally attempt’. A rally attempt begins on the third day, when the index closes higher than the most recent bottom after a correction.
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Going forward, the 200-DMA (23,825) is an important support for the index. Failure to hold above the 200-DMA could result in the index falling back to its previous swing low of 23,300–23,260. On the other hand, if it manages to stay above the 200 DMA, it will likely hover between 23,800 and 24,200 today.
How Nifty Bank performed
On Thursday, Nifty Bank extended its losses and breached the 50 and 100 DMA on the daily chart. Over the past three trading sessions, the index has formed a lower-low and lower-high price structure on the daily chart. The momentum indicator, RSI, has trended downward and is currently around 41, along with a negative crossover on the MACD above the central line. Yesterday, the index opened at 51,428.45, traded between 51,789.85 and 51,263.75, and closed at 51,575.70.
According to O’Neil’s market steering methodology, the index was downgraded to an ‘uptrend under pressure’ when Nifty breached its 100-DMA. However, the index escaped a ‘distribution day’ yesterday as volume was lower than the previous days, leaving the total number of distribution days unchanged at three. A distribution day occurs when the benchmark index or a major sector index falls 0.2% or more on higher volume than the day before.
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Currently, the market trend has shifted sideways. The key support for the index is around 51,250-51,000. A drop below 51,000 could cause the index to fall towards its 200-DMA (i.e. 50,480). On the other hand, a sustained close above 51,800 could see the index trading between 51,800 and 52,300.
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