Bulls vs Bears: This momentum indicator explains why Nifty lacks direction

The tug-of-war between the bulls and bears continue as the market lacks direction, suggests the ADX index, which needs to cross the 25-mark for a directional move, says Ajit Mishra of Religare Broking

The NSE Nifty 50 index has been moving in a broad range of 23,800 - 24,400 post the June 15, 2026 breakout. The index tested the higher- and lower-end of the trading band on multiple occasions, but failed to give a decisive breakout.  On Wednesday, amid the 200-point fall, the Nifty was once again seen testing the psychological 24,000-mark.  Ajit Mishra, SVP Research at Religare Broking reckons that a directional trend clearly seems to be missing in the market, which can be ascertained by key momentum oscillators such as the Average Directional Index (ADX) and the Relative Strength Index (RSI).  Technically, the ADX indicator helps measure the overall strength of a particular market trend. It scales from 0 to 100; a reading above 25 signifies a strong trend, while values below 20 indicate a weak or non-trending market.  Similarly, the RSI indicator helps gauge the speed and magnitude of recent price action. In general, a reading above 50 is considered as positive signal; whereas, a reading above 70 as overbought, and below 30 as oversold. 

 

 

  Mishra highlights that the ADX was in positive territory till the time the Nifty hit a high of 24,531 on July 7, after which it started declining. Today (Wednesday), the Directional Index (DI) has once again shown a negative divergence. Having said that, the Nifty seems to be forming in a triangle pattern on the charts, with the range getting narrower slowly.  "If we join the two highs of April 21, and July 7 and the two lows on April 2 and June 12, it suggests a range of 23,800-23,650 on the downside and 24,400-24,550 on the upside," explains Mishra.  On the contrary, Nandish Shah, senior derivative and technical analyst at HDFC Securities reckons that the ADX index is lower, because the Nifty has been moving in a narrow range. The analyst adds that generally, the market tends to be range-bound during the results season.  Shah believes that the overall trend for the market remains weak, but it is not falling significantly due to the sharp underperformance versus the global markets in the last 18 months or so.  "Even before the US-Iran ceasefire was announced, the Nifty quoted around 24,500 levels, and with Crude oil falling to near $70 levels, there wasn't a run-away rally, and now with Crude back above $90, we are still around the same levels," explains Shah.  From a trading perspective, the analyst from HDFC Securities suggests tracking the price action, with 24,350 as the near-term bullish pivot on the Nifty.  For now, Shah does not see a major downside in the market, at the same times he expects limited upside capped around 24,800 levels. For the overall trend to turn favourable, the Nifty would need to breakout above 24,800, says the analyst.  Meanwhile, Mishra believes that after the 3-4 week consolidation in the market, and with the expiry week ahead, we may see a directional breakout in the near future. The possibility of the Nifty testing 23,800 or lower seems higher for now, he adds.  Among the key oscillators, the analyst from Religare Broking suggests to watch out for strength in the ADX indicator with a corresponding reading above the 25-mark on the particular (DI) index for a likely directional trend indicator.  Apart from ADX, the RSI indicator sustaining above 60 tends to be a positive indicator for the market, adds Mishra.  Disclaimer: Views and outlook shared on the stock belong to the respective brokerages and are not endorsed by Business Standard. Readers' discretion is advised.