Nifty trend for Friday
The bulls are continuing with their heroic run by scaling new peaks almost every day. On Thursday, Nifty closed above the 13,700 mark for the first time ever in history amid robust performance showcased by HDFC twins. The advance-decline ratio for Nifty 50 was in the favour of the decliners since 34 stocks ended in the red as compared to 16 stocks, which ended in the green.
The broader markets too lost their fizz as they underperformed the frontline indices with Nifty Mid-cap closing down by 0.27 per cent, while Nifty Small-cap added gains of 0.15 per cent. As a result, the overall advance-decline ratio went in the favour of the decliners.
No prizes for guessing! Nifty formed yet another indecisive candlestick pattern on the daily chart today. It’s more or less like hitting 6 sixes in 6 balls as for the sixth day in a row, Nifty has formed this pattern.
The price action formed a small-bodied bullish candle with a minor upper & lower shadow. This pattern resembles a high wave or a spinning top candle. Technically, the formation of this pattern after a strong uptrend is considered as a reversal pattern but as we know for a fact, none of these indecisive patterns has got any kind of confirmation. In the near term, the zone of 13,800-13,840 would act as immediate resistance and on the downside, the gap area of Wednesday is likely to provide immediate support to the bulls. Hence, as long as the bulls maintain their head above the level of 13,580-13,600, adopt a buy-on-dips strategy.
There are high chances that we would once again enter into a phase of consolidation after hitting the targets of 13,800-13,840.
The MACD histogram is better than Wednesday, which shows some signs of a pick-up in the momentum. However, the serious negative divergence still persists. The RSI reached near the zone of 80, which is an extreme overbought condition. The MACD line has absolutely flattened. On a shorter period chart, the MACD line is about to move below the signal line, which is bearish.
For reversal trade, we advise the traders to wait until Nifty closes below the prior bar low and breaches its 5-EMA on a closing basis. Till then, be with a positive bias. Meanwhile, buying on dips can be preferred.