Nifty50 extended its losses for the fourth consecutive session and closed at 23,951 on Thursday. Taking cues from the global market, the index started the day with a gap-down opening at 23,877.15 and traded sideways in a narrow range of 24,870.30-24,004.90. After touching an intraday low of 24,870 the index pared some of its losses and closed at 23,951.70.
The widespread decline was primarily driven by the US Fed’s hawkish stance on interest rates. Barring Pharma, all major sectoral indices closed lower. The advance-decline ratio was in favour of decliners and settled around 1:2.
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The index breached its Friday low of 24,180. As per the polarity principle of technical analysis, it has remained below 24,000. The momentum indicator, 14-period relative strength index (RSI), has turned downward and fallen to 40. Another technical indicator, moving average convergence/divergence (MACD), has also turned negative.
According to O’Neil’s methodology of market direction, the current market status is a ‘rally attempt’. A rally attempt begins on the third day when the index closes higher off the most recent bottom after being in a correction.
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Moving forward, the 200-DMA (23,825) is a key support for the index. Failure to hold above its 200-DMA may cause the index to fall toward its previous swing low, i.e. 23,300–23,260. On the flip side, if it manages to hold above its 200-DMA, it is likely to hover between 23,800-24,200 today.
How Nifty Bank performed
On Thursday, Nifty Bank extended its loss and breached its 50- and 100-DMA on the daily chart. For 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 bent downward and is currently around 41, along with a negative crossover on MACD above the central line. Yesterday, the index opened at 51,428.45, traded in the range of 51,789.85-51,263.75, and closed at 51,575.70.
According to O’Neil’s methodology of market direction, the index has been downgraded to an ‘uptrend under pressure’ as Nifty breached its 100-DMA. However, the index escaped a ‘distribution day’ yesterday as the volume was lower than in previous days, keeping the total distribution day count unchanged at three. A distribution day occurs when the benchmark index or a major sectoral index falls 0.2% or more on higher volume than the previous day.
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Currently, the market trend has shifted sideways. The major support for the index is around 51,250-51,000. A fall below 51,000 may cause the index to decline toward its 200-DMA (i.e., 50,480). On the flip side, a sustainable close above 51,800 could see the index trading in the range of 51,800–52,300.
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