Nifty trend for Monday

Nifty started off last week on a strong note and ended with a picture-perfect moment as it closed at a new record high. As a result, it extended its winning streak for the fifth successive week and gained 2.33 per cent.

Nifty formed a bullish candle on the daily as well as on the weekly chart. With this, Nifty negated the bearish implications of the bearish engulfing candle (November 25) and at the same time, it negated the bearish implications of the prior week’s Doji candle. Further, it has broken out of the 13-days tight range along with a higher high & higher low formation throughout the last week, which indicates that despite the formation of indecisive or reversal patterns, the trajectory of the bulls was on the upside.

In the past, we have seen a tight range breakout resulting in a sharp movement on the upside; hence, we expect this breakout could lead the index towards the targets of 13,534, which is a 161.8 per cent extension of the previous swing. Having said, there are some other concerns haunting the index and creating suspicions in the minds of the market participants. Nifty has recorded a new all-time high and for the first time ever, it has closed above the 13,250 mark but the leading indicator i.e. the RSI hasn’t made a new swing high. Though the weekly momentum has picked up, the daily momentum is not showing strength equal to the price strength.

Also, for the fourth consecutive week, Nifty is closing above the upper Bollinger band, which is quite unusual. Perhaps, it’s the new normal just like Nifty is trading at premium valuations i.e. above the 30 PE since August 2020, which has become a new normal for the market.

Interestingly, Nifty is currently trading 23.04 per cent above the long-term moving average i.e. the 200-DMA. In the past like in 2006, 2007 & 2009, it traded somewhere between 32 and 38 per cent above the 200 DMA. Only in these instances, the distance from 200-DMA is higher. Now the important question is that would history repeat itself or we would see a new twist, only time will tell. However, for now, the trend is up and it’s prudent to be with the trend. As long as Nifty is trading above 13,145 levels, be with a bullish bias.