Nifty trend and stocks in action on October 08, 2020

Up, Up and Away! Yes, this phrase aptly summarises the action of Nifty in the last five trading sessions as the index extends its upmove for the fifth consecutive session on Wednesday. Further, for the first time, it closed above the 11,700 mark since February 25, 2020.

The price action of the day formed a bullish body candle with a minor lower shadow carrying higher high and higher low, indicating the continuation of upside momentum in the index. If you recall, we had mentioned earlier that the index is likely to test the levels of 11,750-11,794. On Wednesday, Nifty achieved the said target of 11,750 despite opening flat and slipping in negative terrain for the initial half-hour of the session.

Nifty, after witnessing a breakout around 11,550-11,620 level, has now reached close to the swing high of 11,794, which was registered on August 31. The strength with which bulls are marching higher, there is a high probability that they would touch the mark of 11,794, which is our second near term. However, we suggest the traders, be a bit cautious as, after a rapid rise, the index looks stretched on the upside in the near term. Also, if one looks into the internals of the index, it’s not painting a rosy picture as the advance-decline ratio of Nifty50 is 1:1, and the broader indices ended on a negative note. This is clearly indicating that the index management is the name of the game. It was IT bellwether TCS on Monday, followed by HDFC twins on Tuesday & Wednesday and a joint effort from Reliance & HDFC Bank, which aided the rally.

At this moment, our advice to the traders is to be with the trend and not fight with it for the sake of the good old cliché, ‘the market can remain irrational longer than you can remain solvent’. Why argue against what the market is signalling through price action, just hop on and ride till the wheels fall off then, rotate into the opposing direction when the bear gets resuscitated again by closing below the prior bar low.

Overall, the trend is up with bulls in the driving seat but do not get complacent and instead, keep a close eye on the level of 11,620, followed by 11,550 as these are important support levels.

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