Market volatile; Maintain cash as position

Debt-fuelled welfare a new norm
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Debt-fuelled welfare a new norm

Highlights

Indecision mounts at a crucial level as Nifty failed to sustain with a follow up buying after reversal.

Indecision mounts at a crucial level as Nifty failed to sustain with a follow up buying after reversal. Nifty made a Dragonfly Doji indicating a possible reversal but on price action, we have seen a failed follow up with close below the open along with a long upper shadow. The long upper shadow on Nifty indicates the selling pressure it witnessed around 17,300 levels. It can be attributed to the fact that we have 100 MA placed at 17,125 which acted as key resistance for traders.

The short term 20 MA has been negative for straight 14 sessions on a rolling basis indicating the short term bearishness in trend and also traders bias. The 50 MA also has now turned negative on a rolling basis. It is now important to see how trend plays out near 100 MA since it's a long term trend indicator and should act as support and opportunity for Midterm traders.

The volatility environment remains high with VIX, the indicator that tracks sentiment, elevated above 20 levels. On broader space, we have seen some deterioration in Realty and Media space which have been leaders while PSU Bank still is showing strength and momentum. Auto continues to show improvement but we are yet to see confirmation for it to be a space that can see some buying and make it a favoured space among rotation we are witnessing with the market in bear grip. The breadth has been bearish in benchmark components and some rotation is seen in Smallcap and Midcap space. We believe technically if 16,785 – 16,792 is held, this can prove to be a short term bottom while in case it's broken then supports seen are at much lower levels like 16,050 – 16,100. We suggest little exposure and maintaining cash as a position amid this volatile environment.

(The author is Technical Analyst, Finversify)

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