Nifty trend for Friday
The rally from the March lows has been a very special one not only because the index has recorded gains of 74 per cent from the lows of March but also, due to the fact that despite strong attempts made by the bears at the swing high to enter into the territory of bulls and dominate them, the bulls have never given up easily. At the same time, the bulls have not let them conquer and build the bear castle.
Similar was the story on Thursday as well. Nifty registered gains of 1 per cent and with this, Nifty ended the November series with gains of 11.61 per cent and Bank Nifty jumped 22.83 per cent. The top 10 gainers in the November series were Bajaj Finserv, Shriram Transport Finance Company Ltd, Induslnd Bank, Cholamandalam Investment & Finance Company, Bajaj Finance, Tata Steel, SAIL, M&M Financial Services Ltd, Hindalco, and Motherson Sumi Systems. Only 10 F&O stocks ended in red in the November series.
On Wednesday, Nifty had formed a bearish engulfing pattern with a wide range of 312 points, which is double the range of 10-days. Furthermore, the opening was at a higher level and the closing was near the day’s low. On Thursday, the price did move below the low of the bearish engulfing pattern on an intraday basis, which only turned out to be a trap for the bears as Nifty took support around 12,790 levels and recovered nearly 220 points from the day’s low.
Interestingly, the price has retraced around 61.8 per cent of the bearish engulfing bar the very next day. In the previous instance from the March lows, we have seen a formation of the bearish engulfing pattern and thereafter, there has been no follow-up selling and in some instances, the price had pulled back and retraced around 50 to 100 per cent but the retracements have been gradual. However, in the current case, the price has retraced 61 per cent the very next day. This clearly indicates that the bulls are in no mood to turn over.
Why do we say so? The volatility index, India VIX melted like ice as it plunged 13 per cent. Further, all the sectoral indices ended in green and the advance-decline ratio was in favour of the bulls as 1,261 advanced against 588 decliners.
So, going forward, if the index moves above the 13,145 mark, the formation of a bearish engulfing pattern would be negated and this would open gates for a further upmove towards the levels of 13,220 and 13,300 in the near term. Meanwhile, on the downside, the level of 12,740-12,800 is crucial to watch out and tomorrow being ‘Black Friday’, it would be interesting to see whether the index holds above this level or not. As after Friday, the Indian markets will be off for a long weekend, and usually, what we have seen is that the traders prefer to stay light ahead of the long weekend. Besides, the GDP numbers are also scheduled to be announced on Friday.
Overall, a strong comeback by the bulls without a follow through on the downside to the bearish engulfing pattern is hinting that the index may be sketching out a new trading range between the levels of 12,780-13,145.
Meanwhile, Nifty rollover stands at 70.37 per cent against 76 per cent last time, whereas, Bank Nifty rollover stands at 70 per cent vs last time of 73 per cent.