Day’s action so far
The Indian stock markets are in red today after opening on a positive note. The expectations of the investors were quashed as the stocks went on a selling spree. There is nothing to write home about as all the indices are falling with the midcap stocks leading the decline. Auto stocks seem to be the odd one out today as they are barely holding in the green with 0.43% gain from yesterday’s closing price.
Psychological analysis
It is to be noted that a majority of investors, particularly value investors i.e. those who buy out-of-favour stocks and sell when everyone wants to buy them, are sitting on a huge profits and thus regular profit booking is a healthy sign of a string trend.
Still, since there has been no meaningful correction from so many weeks and this seems unsustainable, thus today’s weakness could indeed be the first of a massive decline in the markets.
Technical Analysis
The indices form Bearish Engulfing and that too in an overbought position.
Further, technical analysis of NIFTY 50 gives the impression that a strong trend is in place with the 20 days simple moving average (SMA) and the 200 SMA rising.
Also, the 20 SMA is near a round figure, which is always a psychological barrier to both rising and falling prices, of 14,000.
However, the distance between the two SMAs is wide and this hints at a decline in prices.
Thus, long-term traders should not be surprised if the NIFTY 50 falls to 14,000. Short-term traders are advised to close their positions which are in profit. Further, shorting is not advised for conservative traders.