The Indian stock market witnessed a significant event on August 12, 2023, as the Nifty Midcap 150 index experienced a sharp decline of 2.97%. This decline raised eyebrows among traders and analysts, particularly due to the formation of a bearish upthrust bar according to Volume Spread Analysis (VSA). Additionally, the surge in India VIX by 8% over the past two trading sessions indicates that anticipated volatility in the market is on the rise.
The Nifty Midcap 150 index, which opened at 15,598.50, closed at 15,045.10, forming a distinctive outside bar pattern by breaking and closing below the four-day low. This pattern is often seen as a bearish signal, suggesting that the market may be entering a phase of downward pressure.
Volume Spread Analysis, a trading methodology that combines price action and volume data, is often used by seasoned traders to analyze market movements. In this case, the formation of the upthrust bar on August 12 implies that there was an attempt by the market to push prices higher, only to be met with a swift reversal and a subsequent drop in value. This suggests that there may be strong selling pressure in the midcap segment of the market.
Adding to the concern is the sharp increase in the India VIX, which is a measure of market volatility. An 8% surge in just two trading sessions indicates that traders are anticipating greater market turbulence in the near future. High volatility can often lead to erratic price movements, making it a challenging environment for traders.
Interestingly, the broader Nifty 50 index hasn’t exhibited significant changes compared to the closing on the previous Monday. This divergence between the midcap and large-cap segments of the market could indicate that investors are becoming more selective and cautious, favoring larger and more stable stocks.
