Stock Market

Trade Setup: Falling VIX, negative market breadth big short-term concerns for Nifty

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The market on Tuesday saw a positive opening on favourable global cues, however, it pared gains, but continued to stay in a capped range throughout the day, avoiding any major declines.

Volatility was witnessed as NSE benchmark Nifty continued to post fresh lifetime highs.

The index ended with a gain of 46.55 points or 0.40 per cent.

As, we enter the penultimate day of the expiry of the current derivative series, expect some amount of volatility to creep in as the trades will be dominated by the rollovers.

Expect the levels of 11,760 and 11,795 to act as technical resistance area.

Supports may come in at 11,710 and 11,630 zones. The relative strength index (RSI) on the daily chart is 75.5150.

The indicator remains bullish, as it has marked a fresh 14-period high, but trades in overbought territory.

The daily MACD stays bullish while trading above its signal line.

The candles showed a small rising star, which is a small candle with a gapup, which may potentially show continuation of up move. However, In the present circumstances, mechanically analysing the market and talking about supports and resistance would be a no-brainer. This is the time when we look at some macro-technical indicators.

The market is evidently showing signs of a crack if we look at the market breadth. The Monday’s session saw 47 out of 50 stocks in Nifty rising.

Tuesday’s session saw just 21 stocks out of 50 ending in the green. The overall market breadth also worsened from 1:1 in the previous session to 1:1.5 in the favour of declines on Tuesday.

Also, India VIX, the Volatility Index, showed a very minor increase, as it traded near its historical low levels. Consistent low levels of volatility as reflected in the VIX (Volatility Index) clearly reflects the complacency of the market participants, and such persistent levels often lead to a top. The deteriorating breadth of the market raises an equal concern.

In the present context, we strongly recommend continuing to approach the market with great caution. Remain invested in defensives and in sectors that are showing signs of reversal as this strategy will be more rewarding than blindly chasing the momentum. STOCKS TO WATCH: Short positions were seen being added in stocks of Idea, PNB, South Indian Bank, IDBI, ITC, TV18 BROADCAST, YES Bank, Tata Power, State Bank of India, ICICI Bank, Bank of Baroda and ONGC. (Milan Vaishnav, CMT, MSTA is Consultant Technical Analyst at Gemstone Equity Research Advisory Services, Vadodara.

He can be reached at This email address is being protected from spambots.

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