Index trend and stocks in action December 16, 2019

Friday’s session turned out to be a blockbuster for the bulls, as the Nifty registered close to a per cent gain, its highest daily gains since November 26, 2019. The start to the week was subdued and bulls were pushed on the backfoot on Tuesday; however, the benchmark index did a volte-face and surged almost 250 points from lower levels to end the week with gains of about 1.39 per cent. The news from the foreign shores kept the domestic markets buoyant. The news of a possible trade deal between the US and China and win for Boris Johnson in the UK elections gave bulls the spur.
 

On Friday, the daily time scale Nifty had formed a bullish candle with a gap up opening. We have also observed a back-to-back formation of opening upside gaps on the Thursday and Friday sessions. On the weekly time scale, the bearish candle of the weekend of December 6, 2019, failed to get the confirmation for the down move, as the Nifty followed up with a bull candle with a lower shadow, indicating buying support evolved from the lower levels. Technically,  the index reclaimed 21 DMA and retraced 78.6 per cent of November 28 to December 11  on the daily time scale. The 250 points bounce from Wednesday’s lower level turned the market into a bullish structure. At present, the market is trading above all the short term moving averages.
 

Going forward, we suggest you be with a positive bias on the Nifty as long as Friday’s gap area is protected. All the sectoral participation in the last week’s bounce is a positive sign for the market. If we analyse, the index has been trading in a broad range of 11,800-12,150 for nearly about 31 trading sessions. The index needs to break on either side for a directional move. The Bollinger bands are still in narrow equidistance range showing the same range.
 
The directional indicators, ADX and –DI, are almost placed at the same value of19.59 and 19.46 while the +DI is above the ADX and –DI. The MACD histogram also suggests that the momentum has picked up to a bullish side. In any case, if the RSI move above the 63 levels and the Nifty closes above the 12,150 mark, the next target on the upside will be about 12,300 in the short term. On the downside, 11,980 is an immediate support level followed by a major support level, placed at 11,800 mark.
 

Despite all, the economic data points do not seem to be in a good shape. However, the markets completely de-coupled with economic factors, with the liquidity being one of the key driving forces, fueling the rally. But this liquidity is not across the market, its limited to only selective large and midcap names. Hence, you need to be selective and trade with strict stop losses.