Nifty trend for Monday

Every now and then, people talk about how mainstream window shopping has switched to online shopping and how the gentlemen’s game i.e. Cricket, shifted its gears from Test Cricket to the fast & furious mode i.e. T-20 Cricket. With the passing time, even the stock market has changed and the year 2020, is a perfect testimony of this. To help you understand, we would highlight the recent correction, which we had witnessed in the index. 

Finally, Nifty ended its seven-week winning streak as it ended with a modest loss of 0.08 per cent; however, the price action in the last week was not less than a roller-coaster ride and this could be gauged from the formation of a candlestick pattern on the weekly chart as Nifty formed a ‘Dragonfly Doji’ like pattern. Right at the beginning of the week, Nifty logged its sharpest intraday fall since April 2020 amid the reports of a new variant of the novel Coronavirus in the UK. However, in the next three days, what we witnessed is that Nifty has retraced its entire fall. So, this showcases that during this year, the trend changes have been swift & quick. 

Usually, the magnitude of the fall, which we had witnessed on Monday, typically would have taken maybe a week or two but instead, over here, we saw this happening really quick. It ultimately proved out to be better than bad as it helped in removing the euphoria that was built in the markets as the latter were scaling to new heights every day. Moreover, it gave an opportunity to those, who had missed the bus earlier. Along with this, we also saw the volatility gauge i.e., India VIX, jumping to 24 within no time and taking a U-turn from the earlier tops, which was placed around the zone of 24-26. 

Technically, Nifty still looks strong, and the swift correction turned out to be a blessing in disguise as Nifty, which was day-to-day moving far away from its 20-DMA, reverted to its mean during this period. And secondly, on November 25, we saw the formation of a big bearish bar while in the recent fall; Nifty took support exactly around the top of that big bearish bar. Thus, the earlier top turned out to be a major support.

Going ahead, the level of 13,600 is a crucial support for the index, and given that, we are entering into the last week of December. History suggests that the FII desk is in a holiday mood and hence, we may see tepid inflows from their side and absence or lesser participation from FIIs may keep the upmove of Nifty under check as FIIs flow was one of the key factors helping the markets to reach new heights. Further, the second key driver of the rally i.e. Bank Nifty has also taken a backseat as it was seen underperforming Nifty in the last week or so.

So, our advice for the trades would be to stick with quality names and look for stocks, which are breaking out of solid bases. At the same time, maintain a strict stop-loss for all the long positions.    

Overall, the view for the coming week would be to be with a bullish bias. Immediate support is placed around the 13,600 levels and a breach of this would open gates for a further correction towards the levels of 13,340 and 13,150. Meanwhile, on the upside, the level of 13,800-13,880 would continue to act as a resistance zone.