Adding to the woes of the bulls, Nifty has just formed a Death Cross on the daily charts a signal considered ominous for the markets near-term outlook.
However, analysts said it may not have much significance given the sharp fall that the market has already witnessed.A Death Cross gets formed on daily charts when the short-term moving average (50-DMA) crosses below its long-term moving average (200-DMA).It will not have much significance, as we have fallen over 30 per cent within a short span of time.
These signals work in normal market conditions.
This is not a very normal situation, as demand and supply are being influenced any external factors," said Mazhar Mohammad, Chief Strategist Technical Research - Trading Advisory at Chartviewindia.in.Even if some bullish signals arise in some time, that too will not have any significance, he said.Nifty has been in a secular downtrend, as investors are fleeing equities in droves amid a rise in the number of coronavirus cases, threatening a collapse of many businesses.
Till Thursdays close at 8,263, Nifty has fallen 33.47 per cent from its high of 12,430 recorded in January.Milan Vaishnav, Consulting Technical Analyst and founder of Gemstone Equity Research - Advisory Services, concurred with Mohammad, saying that this is a lagging formation and the Death Cross formed after such steep downside would not have its usual significance.We will continue to be dominated by global trade setup.
What we saw today was a broad short-covering-led technical pullback.
The market will either consolidate in a broad range or see some negative bias, Vaishnav said.Mohammad said now Niftys next stop would be in the 7,850-7,950 zone, but if that is broken, then we may need to prepare for bigger cuts, which may take it to 7,450 or 7,000 levels.Thanks to the selloff, just five stocks in Nifty100 pack are trading above their long-term moving average (200-DMA) Pidilite, Divis Labs, Cadila Healthcare, Bharti Airtel and Avenue Supermarts.For half of them, the short-term moving averages are trading below their long-term averages, signalling Death Cross on each individual counter.