Sentiment Indicators
200-DMA INDICATOR:
This indicator measures the percentage of Nifty 50 stocks that are trading above/below their 200-day simple moving averages. The 200-DMA is considered important as it is one of the basic technical indicators that can be used to determine the long-term trend of security. Currently, all the constituents of Nifty 50-the equity benchmark index are trading above their 200-DMAs. This is a very rare scenario. On a WoW comparison basis, we observed that 2 per cent of the stocks have managed to close above their 200-DMAs. In the last five trading sessions, Bharti Airtel had managed to close above its 200-DMA. In line with our expectations, Nifty index has taken a pause in the last five trading sessions. The index has traded in the range of 293.05 points for the last five trading sessions and all the candles formed are indecisive in nature. Among the constituents of Nifty 50, Bajaj Finance, IndusInd Bank & Tata Steel are trading way above their 200-DMAs (on an average of 38.86 per cent).
It would be interesting to watch the behaviour of the above-mentioned stocks as they look extremely overstretched. It would be no surprise if we see these stocks stall their momentum and slid into a period of consolidation. Currently, the index is trading above its 200-DMA by 26.24 per cent, which looks extremely overstretched. However, if we look at the candlestick chart of the index, all the last five candles have a long lower shadow, which signals the emergence of buying interest after an intraday weakness. With this, all the constituents of the index are trading above their 200-DMAs. This is a positive indication, which signals the chances of a further upmove in the short-term.
Sectoral Sentiment Indicator :
This indicator basically interprets the number of stocks in the sectoral indices that are trading above/below their 200-day moving averages. This will help us to know which sectors are improving their performance. Currently, all the sectoral indices are trading above their 200-DMAs.
Among the constituents of Nifty Auto, Nifty Bank, Nifty Financial Services, Nifty IT, Nifty Media, Nifty Metal, Nifty Pharma & Nifty Private Bank index, all the stocks were trading above their 200-DMAs. The week had been a lacklustre one and not much action has been witnessed as the benchmark index-Nifty has traded in the range of 293 points. This is clearly visible in the sectoral sentiment indicators as almost ten sectors remained unchanged on a weekon-week comparison basis. Nifty PSU bank index has crossed the wall of 200-DMA on November 18, 2020, and thereafter, witnessed an almost 27 per cent upward move in just 15 trading sessions.
However, after the sharp upward move, the index has taken a breather in the last five trading sessions and this is clearly visible in this indicator as almost 8.34 per cent of the constituents have slipped below its 200-DMA. Nifty PSU Bank Index has cooled off by 5.18 per cent from the high of 1,902.40, which was registered on December 09, 2020. Meanwhile, Nifty Metal has continued its northward journey as in the last five trading sessions, the index has gained almost 5.33 per cent. Among the constituents of Nifty Metal index, we have seen an average bounce by 7.76 per cent in the last five trading sessions. Currently, Nifty Metal index is trading above its 200-DMA by 49.51 per cent, which looks extremely overstretched. Among the constituents of Nifty Realty index, last week, the stocks were trading above their 200-DMAs by an average of about 29.37 per cent and in the current week, we have seen an average bounce by 4.82 per cent. Considering the current structure of the indicator, there are no negative triggers at present. Investors and traders should adopt a buy-on-dip strategy.
Indicator To Gauge Internal Strength :
This indicator helps us to gauge the internal strength of the market. Among Nifty 500 stocks, a higher number of stocks reaching 52-week highs and the lesser number of stocks hitting 52-week lows represent a bull market while the opposite, suggests a bear market. On a WoW comparison basis, the previous week's average ratio was 37:0 and in the current week, the average ratio is 26:0 where, on average, 26 stocks touched new 52-week highs while on the flip side, not a single stock has hit a new 52-week low.
From December 09 to December 15, Nifty 500 index was consolidating in the range of 180 points. This is clearly visible in the chart as on average, only 24 stocks have marked new 52-week highs during the same period. However, on Wednesday, Nifty 500 index has gained 0.86 per cent and marked a fresh all-time high. Along with this upward move, almost 36 stocks have marked new 52-week highs, which is the highest since last December 08. This suggests that the internal strength of the market had improved on Wednesday.
(Closing price as of Dec 16, 2020).