Markets likely to remain volatile
After witnessing huge volatility, Indian stock market closed almost flat in the last week.
After witnessing huge volatility, Indian stock market closed almost flat in the last week. The Nifty closed with just 1.85 point loss while the Sensex closed with 72.95 points higher.
The BankNifty rose by about 210 points. The broader indices underperformed the benchmarks. Nifty Midcap-100 index lost 349.90 points and the Nifty Smallcap-100 index down by 114.2 points. The advances are much lower than the declines even though the market has fallen a little.
Nifty formed a Hanging Mar candle on the weekly chart. Last week, it formed Shooting star, an exact opposite shape, we can say, inverted Hammer or Inverted Hanging Man. These back to back bearish patterns indicate traders' indecisive mindset.
The market witnessed huge volatility with over 100 points move almost all the days. One important observation is that till now Nifty attempted at least five times to close above 11761. On an intra-day basis, it crossed but on weekly closing has become a mirage for the markets.
For the last 18 trading sessions Nifty was not able to move beyond 11550-11760 range. This time, correction is not giving any clear directions to the bulls and bears.
In the last six trading sessions, Nifty experienced a roller coaster move and hurt the short traders on both sides. Though it is flat base formation on top, the negative divergences in leading indicators are not giving any chances to bulls to move to new highs.
On a monthly chart, Nifty formed a small body and small shadows candle, an Evening Star like pattern with significant negative divergence in RSI. The only worry about the current situation is market volatility.
Even though daily bearish patterns are failing consecutively with increased volatility, there are no clear bearish confirmations on any time frame. This situation is creating some very short term or intra-day trading opportunities with greater volatility.
The stock-specific activity increased as the financial results are pouring into the market. The Stochastic oscillator is suggesting the upside momentum may continue further but it may face resistance at the 11760-11800 zone.
Any decisive close above this level takes the Nifty to new highs above 11900-1200, as we mentioned in earlier columns. If this does not happen, it may test the support zone of 11550.
Unless this range is not broken decisively, the sideways will continue with considerable higher volatility, as General Elections results are nearing. The lack of follow-up action on either side is also creating confusion about the direction.
The Hammer on weekly basis is suggesting the lost momentum on the longer time frame. The back-to-back bear and bull candle also suggest the same.
For the positional index ,traders must maintain this range as a stop losses for their long and short positions. Either side breakout will give a sharper move. If traders are not willing to such distant stop losses, better remain on side and wait for clear signals.
As voting was completedfor the 50percent of Lok Sabha seats, many of the serious fund houses know the outcome with their own internal surveys.
Keep watching the market moves for the crystal clear direction and focus on the stocks which are declaring earning growth and showing price strength.
With higher volatility in place, make sure your money management rules work for you.
(The author is a financial journalist and technical analyst. He can be reached at firstname.lastname@example.org)