Nifty50 on 20 December
Nifty50, the benchmark index of the Indian stock market, lost around 4.70% last week and formed a bearish candle during that time. Barring Nifty Pharma (+1.5%), all sectoral indices closed lower. The top losers were Nifty Metal, Energy, Auto, Financial Services, and Bank, closing 6.6%, 6.1%, 5%, and 5.1% lower, respectively.
On the daily chart, it extended its loss for the fifth consecutive session and closed near the day’s low at 23,587. On Friday, it formed another bearish candle on the daily chart with a lower-top and lower-bottom price structure. The advance-decline ratio was in favour of decliners and settled around 1:5.
Technically, the index breached its 200-daily moving average (DMA) and traded below it with comparatively higher volume. The momentum indicator, 14-period relative strength index (RSI), is trending downward on the daily and weekly charts, along with a negative crossover on moving average convergence/divergence (MACD) on both time frame charts.
According to O’Neil’s methodology of market direction, the current market status is in 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 (also known as downtrend).
Currently, the index is trending below its 200-DMA. The overall sentiment is negative, but some bounce-back rallies cannot be denied. However, the 200-DMA may act as a critical resistance level at the current time. Further, sustainable trading below the 200-DMA may result in continued volatility.
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How Nifty Bank performed
On Friday, Nifty Bank extended its loss for the fifth consecutive day and is approaching its 200-DMA on the daily chart. The index opened at 51,428.45 and traded in the range of 51,629.00–50,609.35 before closing at 50,759.20.
On the weekly chart, the index formed a bearish candle with a lower-high and lower-low price structure and has lost around 5.27% with a negative bias on a weekly basis.
The technical indicator, RSI and MACD, are both showing negativity and are currently trending in a downward trend.
According to O’Neil’s methodology of market direction, the index downgraded to an “uptrend under pressure” as Nifty breached its 100-DMA on Thursday. However, the index escaped a “distribution day” in today’s trading session as volume was lower than previous days, and the total distribution day count remains at three. A distribution day occurs when the benchmark index or a major sectoral index fell 0.2% or more on higher volume than the previous day.
Currently, the volatility has increased and selling pressure has intensified. However, immediate support is placed around its 200-DMA, which is placed near 50,500–50,400.
Also Read: Week Ahead: F&O expiry, IPOs & listings, FII activity, global cues among key market triggers for Sensex, Nifty
Stocks to buy, recommended by MarketSmith India:
Brainbees Solutions Ltd.: Current market price ₹ 638.75 | Buy at ₹ 620–640| Profit goal ₹724 | Stop loss ₹ 575| Timeframe 2–3 months
ICICI Bank Ltd: Current market price ₹ 1,288.40| Buy at ₹ 1,270–1,300| | Profit goal ₹ 1,530| Stop loss ₹ 1,208| Timeframe 2–3 Months
Also Read: Why retail investors continue to root for the underdogs
