Nifty falls below 20-wk average on weekly basis

A 400-point bounce from the day’s low due to a rally in banks and financials resulted in a positive close. Nifty gained 151.15 points or 0.69 per cent. But, it declined by 372.40 points or 1.65 per cent during the week. The FinNifty and the BankNifty were the top gainers with 1.31 per cent and 1.07 per cent respectively. The metal and services indices are up by 0.96 per cent and 0.82 per cent, respectively.

The FMCG and auto indices advanced by 0.44 per cent and 0.41 per cent. The media declined by 1.02 per cent and is the top loser. The Realty and pharma indices are down by 0.70 per cent and 0.65 per cent. The market breadth is negative as 1364 declines and 1226 advances. About 86 stocks touched the new 52-week high, and 98 stocks traded in the upper circuit. Infosys, HDFC Bank, Reliance, and Axis Bank were the top trading counters on Friday, in terms of value.

The benchmark index, the Nifty, found support at the rising channel demand line. HDFC Bank, ICICI Bank, and Bajaj Finance contributed about 90 points to the recovery.

The index has tested the 50DMA resistance on Friday. After opening with a 142.30 points or 0.65 per cent gap down, the index bounced 401.90 points or 1.85 per cent from the day’s low. It registered above-average volume but less than the previous day.

On a weekly chart, it declined below the 20-week average but was able to close above it with over four hundred point recovery. However, it closed below the 10-week average for the first time after the first week of November 2023. The weekly volume shows that the distribution took place. The Weekly RSI closed below the prior low and near the 60 zone. The negative divergence got the confirmation for its bearish implications.

The positive development is that the daily RSI bounced from the prior low and the 40 zone and avoided entering into the bearish zone. The immediate resistance is at 20DMA of 22287 if it clears the 50DMA of 22,173. The mean level of the rising channel is also at 22,287. So, for a resumption of the uptrend, the Nifty must clear this solid resistance. On the downside, if it declines below the 22,200 level, it will be negative and can test Friday’s low of 21961. Below this level, 21710, which is the prior swing low, will act as support. The 100SMA and 100 EMA are at 21729, and 21639 is the final strong support for the ongoing uptrend.

If the index breaks this support zone, which means that the market has entered into a confirmed downtrend. On a weekend, watch the news flow about the war and HDFC Bank earnings. These two events weigh on the market. Stay on the sidelines and sit on the cash.

(The author is Chief Mentor, Indus School of Technical Analysis, Financial Journalist, Technical Analyst, Trainer and Family Fund Manager)