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Nifty Fails to Retake its 100-DMA; Media and Banking Stocks Drag the Market

Posted Date: June 09 2020
Today’s Action

Nifty, -1.2%; Sensex, -1.2%; Nifty Midcap, -0.4%; Nifty Smallcap, -1.4%; Model Portfolio, +0.1%

Market Pulse Confirmed Uptrend

Nifty opened on a flat note and quickly advanced around 100 points to make an intraday high of 10,291. However, it quickly succumbed to selling pressure post noon and lost over 200 points from day’s high to close 119bps lower for the day. As today’s volume was lower than the previous session, Nifty escaped distribution. Likewise yesterday, it tested its 100-DMA (10,282) and failed to close above it. Historically, 100-DMA has been a crucial level to watch for Nifty. Around 74% of the Nifty50 constituents ended in the red. Icici Bank (-3.1%) and Wipro (Nse) (-3.6%) led the decliners.

On the sectoral front, barring Nifty Pharma (+1.8%) and FMCG (+0.1%) all the indices closed lower. Nifty Media (-3.3%) and Nifty Bank (-2.2%) were the major decliners. The advance-decline ratio was inclined toward decliners. Of 2,129 stocks traded, 749 advanced, 1,084 declined, and the remaining traded flat.

The beauty of our CAN SLIM method is that we need not "expect," "hope," or "wish for" with respect to market action. We will take what the market gives us and continue to monitor unfolding conditions. We always look for stocks with strong relative strength. But investors should understand that it is not prudent to blindly buy stocks that have a high relative strength or simply because they have been performing well. This is the essence of momentum investing, and it can get you into trouble. Rather, one should base buying decisions on sound fundamental and technical analysis. Only invest in stocks that have strong fundamentals (i.e., good sales, earnings, margins, etc.) and that are breaking out of sound base structures on heavy volume.

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