Expect volatility on the eve of weekly expiry!

Nifty declined for the third successive day. It declined about 118 points from the day's high. The index breadth was negative. Barring Nifty IT, which advanced 0.63 per cent, all other sectoral indices ended in the red. Nifty settled at 15,721.50 with a decline of 0.17 per cent. Out of 50 stocks, 35 ended in red in Nifty. Midcap-100 and Smallcap-100 indices outperformed as they advanced by 0.26 per cent and 0.22 per cent, respectively.   

The price action of the day formed a bearish candle with an upper shadow. This pattern indicates the continuation of a weak trend amid a range-bound action. Technically, for the second successive day, it closed below the previous day's low. All the early gains erased once again. VIX closed at the lowest level after January 03, 2020. The index breadth was negative. It closed below the 20-DMA after May 04.   

As it closed below the 20-DMA, expect a volatile move on the downside in the near future. The prior swing low is at 15,450 levels and the 50-DMA is at 15,247 levels. Nifty may test these levels in the medium-term if there is a follow-through selling seen in the index on Thursday. 

As the index traded in a sideways direction for almost two weeks, the breakdown of the range would result in a sharper move. Unless Nifty moves above its previous day’s high of 15,840, it’s better to avoid the long positions.   

The RSI is moving in a downward channel and is below the prior swings. The momentum has increased on the bearish side. The negative directional indicator i.e. the -DMI is dominating as it moves above the +DMI & ADX. The daily ADX (13.37) shows weaker trend strength. A fall in price and a rise in ADX line will be the first few danger signal for the mart. As the weekly expiry is in place, the volatility could be the hallmark of the day!