Nifty This Week: Technical Charts And More – Bruised And Battered By Small-Range Volatility

After all that frenetic activity of the earlier week, we had the market moving in a range. But that was no help for traders. In fact, it made matters worse! People can handle a one-sided move to some extent but when the market is indecisive about what it wants to do, then it becomes quite tough. When that aspect comes on top of some existing pain, it makes matters even worse. If someone thought other factors were the cause for their misery (broker/advisor/algorithm, etc.), a look at the first chart will show you who the real culprit was – small-range volatility. The market caught you coming or going, and look at all those gaps, there was just no way to deal with those..So, bruised and battered is the condition of most in the market right now. Not just traders. Even investors have got mauled with a sharp drop in portfolio values. Even if your stocks are of good quality they still didn’t survive the decline. On average, I would think, portfolios are down by 30%. It should now take some really tough measures to get them back up again. We spoke of the VIX last week and here is an update in the next chart..It can be seen that the VIX continues to maintain a steady rising plot..But the sharp rise seen at the end of the last week was followed by a sharp dip too on Monday. After that, the VIX plot too seems a bit uncertain as to what to do..There is no pause in the Russia-Ukraine conflict as the week ended but no major escalation either, atleast not the worst kind that came to be feared mid-week. If the rising trendline in the VIX chart breaks, then maybe, we can breathe a bit more easily. We will have to wait to see on that one. Last week’s column definitely carried a bearish tinge. I think that must have been the most bearish-sounding article I've written in many, many months. Most of those points continue to remain relevant so I suggest readers may want to revisit them, if only to refresh mememory of what to look out for. The week just ended made a lower low so the sequence of decline is continuing. Using a Heiken Ashi chart, as seen in the third chart, we find that the candles are still distinctly bearish and of Initiation types (yet) so that suggests more action in the same direction. We can draw a channel but relying on that would be like clutching at straws. When a multi-week decline is in progress and a technical setup emerges, we have to get on the alert, but that’s about all. The market will have to show us that it has a different plan before we make pronouncements on that..We are churning quite a bit in 2022. The year-to-date return on the Nifty is a negative 6.5%. March has contributed 3.3% of that loss while the week just ended was responsible for 2.5% of that loss. And, to think that March is less than a week old. The Relative Strength Index readings on the daily and weekly charts are dropping. If the market goes lower in the next week, the daily charts may have a chance to form a divergence pattern. That is the first element to watch out for. Not that it will seal it all in, but just that it will hint at some slowing down of momentum. Much to be done yet before that can get reversed. On the Directional Movement Index set up, we find the bears firmly in control in the daily charts and with the ADX line rising, the trend is still firmly in the grip of the bears. So again, much to do before it gets reversed. On the weekly DMI, the bears are attempting to gather some footing but have not succeeded..Hence with the broader view, bulls have not really lost control yet but they do need to protect their turf here or risk losing the advantage..Both these aspects can be seen on the fourth chart..For the week ahead, one has a couple of choices. If one cannot play the short side (many can’t), then just sit aside and watch for improvements in the root cause – the conflict in Europe. If one does want to participate, then be able to swing with the market as the small range volatility shall demand nimbleness. If one is looking to buy into stocks that have declined, then it is an individual stock assessment and not a market thing for now. So ferret those out and look at them keenly for signals. And for those that just like to watch and comment from a distance, well, that is a no-risk, full-year game and one can continue zestfully since there is so much forbearance for it right now..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.

Nifty This Week: Technical Charts And More – Bruised And Battered By Small-Range Volatility

Be ready to swing with the market as the small-range volatility shall demand nimbleness, writes CK Narayan.

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