Index trend and stocks in action January 03, 2020

The bulls scored a century on Thursday and recorded a closing high. At present, it is within a striking distance from the all-time high level of 12,294. The price action of the day formed a sizable bullish candle.

After registering an all-time high level of 12,294, the index entered into a corrective and sideways mode. It has been moving in a range for the past eight trading sessions and if we compare the current range with the earlier one, the former apperars smaller than the latter, as it is a range of around 175 points. In this range move, we have observed a divergent signal in major indicators. As we discussed earlier, the divergences in all timeframes are not a good sign at this juncture. Nifty is moving up but the trend strength looks weaker. The momentum is waning. Within this range move, the leading indicator RSI formed lower highs. The ADX is moving down. The MACD histogram is still around zero with negative momentum. The indifferent behavior of the price is surprising the fundamental analysts as well.

Nifty is making fourth attempt to cross the level of 12,300 and in any case, the flat base breakout or closing above 12,300 means there would be another room for 100-175 points on the upside for the index. While a move below the 12,100 level would be the first sign of weakness. At this higher valuation zone on the backdrop of weaker economic data points, there is an element of doubt in the mind of traders. Let us watch as to where this less-trustworthy rally takes us. As of now, be with positive bias as long as it is trading above 12,110.