Nifty This Week: Technical Charts And More – March Series R.I.P.
An index curve is displayed on a screen inside a stock exchange. (Photographer: Jasper Juinen/Bloomberg)

Nifty This Week: Technical Charts And More – March Series R.I.P.

BloombergQuintOpinion

Hardly anyone would have grieved the passing of the March F&O series. It was indeed a torrid affair as gaps and intraday volatility rocked traders right into the last day of the series. The expiry session was marked by even more heightened volatility and it did not matter whether you were a system trader, a trend follower, a buyer, or a seller of options, a khabar based trader... nothing mattered. You got taken to the cleaners. Those who did make money for the month (and surely there would be some) should thank their stars for the outcome. Once in a while, the stars do come together in a favourable pattern!

The March series set up some minor records. It was one of the largest monthly ranges since March 2020 and the biggest monthly dip since September 2020. Nifty Bank too got clobbered by 10% and notwithstanding the recent fondness for PSU banks, that lot was down by around 16%. Almost no sector was spared.

The Nifty 50 and the Bank Nifty broke their 50-day moving averages, something that has held things together since the bottom a year ago.

Not a very happy augury as the chart shows, unless the market can regain ground above it swiftly.

Nifty This Week: Technical Charts And More – March Series R.I.P.

But the market did halt at Thursday’s low and attempted a rally on Friday. Perhaps this was because the price drop was into the confluence of 62% pullback (January-March swing) as well as 23.6% pullback (September to March swing). The next retracement zone to these swings is also shown in the next chart. That leaves more room to the downside if matters don’t improve.

Nifty This Week: Technical Charts And More – March Series R.I.P.

Technically, the March 12 rally to 15,375 is a lower top to the 15,430 Feb. 16 high (ignoring the spiky high at 15,524 of Feb 24, the day of NSE breakdown, as it was not really an actively-traded high).

Hence the break of the first swing bottom at 14,521 on Feb 26 has to be taken as the first of the lower top-lower bottom pattern formation.

Also, the current down move is larger in price (1,114 points) and in time (9 days) compared to the earlier corrective downswings. W.D. Gann says that when there is an overbalance in both price and time, the trend swing is changed. See the chart.

Nifty This Week: Technical Charts And More – March Series R.I.P.

So, is the great game up? The answer is no. The signals shown above are of a short-term nature. This is also being confirmed by the fact that the nearest swing up (from the January low) has also held at the 62% retracement while the long-term swing is retraced only 23.6% so far. That is the bare minimum that one has to give as room for corrections. Further, the entire corrective move from the Feb 16 high to now has taken 26 days while the last swing up had taken only 13 sessions.

Usually, a trend is said to be changed when the up move is retraced faster in price and time. Here neither the low of January (13,666) is broken and the time taken is already twice of the up move. Therefore the trend is not anywhere near being broken.

Now, the next question is, are we done with the correction? The answer is probably yes. Now what is needed is for some forceful upside action indicating that to be so. This will need some news or event triggers. Right now those are coming from overseas but we probably need a more local trigger. That could come from the next round of quarterly results. However, these are slated for release only perhaps in the second week of April. Until then, I am afraid we may be scuttling about in this area. Perhaps another week of churn until around April 4, which is a cycle-turn date and we can expect some upside action post that.

Hence one needs to bide one’s time until the trends make a comeback. Most stocks and sectors have undergone a corrective churn and even many of the small and midcap runners have had a pullback. So the market could be ready for a run. Some patience should be exercised to await it.

CK Narayan is an expert in technical analysis; founder of Growth Avenues, Chartadvise and NeoTrader; and chief investment officer of Plus Delta Portfolios.

The views expressed here are those of the author, and do not necessarily represent the views of BloombergQuint or its editorial team.

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