Nifty trend for Monday
Nifty witnessed a roller-coaster ride on Friday as the index swung sharply in both directions before ending the day with modest gains of 0.26 per cent. On Friday, Nifty opened the session at 13,514 and hit a fresh all-time high of 13,579. Thereafter, a glimpse of bear attack was witnessed as the index was pushed towards the intraday low of 13,402 but in the end, bulls had the last laugh as it recovered from the lower levels and closed above the 13,500 mark. With this, the index extended its winning streak for the sixth week in a row as in the last week, Nifty registered gains of 1.93 per cent.
Last week was a very interesting week for Nifty as out of five trading sessions, the index formed a Doji-like candlestick pattern in almost three sessions. Moreover, on Friday, the index formed a long-legged Doji-like pattern as the range of the day was highest in the last ten trading sessions and also, it was greater than the 10-day average. So, certainly, the formation of an indecisive candle during the week along with the formation of a long-legged Doji on the final trading session of the week indicates that there was a strong tussle among the bulls and the bears. Despite this, the bulls are showing no signs of abating as several bearish or indecisive candles failed to get any kind of confirmation in the recent past. Besides, on Friday, Nifty formed a higher high & higher low as compared to its prior bar, which indicates that this should be viewed as a pause or a breather after a spectacular rally. Further, on the weekly chart, there is a formation of a bullish candle, carrying higher high & higher low. Also, Nifty is failing to close below the prior bar low, which indicates that the overall trend is up. For a price action trade, the trend is crystal clear; however, the indicators are creating some suspicions about the ongoing trend.
On the indicators’ front, the RSI (76.46) is currently in an overbought condition. It made a parallel high at 78.9 but the price is making higher highs. Even on the weekly chart, the RSI is at 73.91 and in an overbought condition. Interestingly, the MACD histogram is not rising and instead, showing a severe negative divergence. The MACD line also formed parallel highs. It is at a historically high level and reluctant to move higher. There is probability of consolidating between 13,350 and 13,600. The 8-EMA is acting as key support for the index since November lows. Hence, as long as the price is above 8-EMA, the bulls would be in a commanding position.
Going ahead, the opening on Monday and the price action thereafter is crucial to watch out for as sustaining & closing below 13,400 would be a breach of the rising trendline on the 75-minutes chart and long-legged Doji gets a confirmation. Hence, for Monday, 13,400 would be crucial for the bulls as a close below this would let the bears put a foot into the door.