Nifty trend for Tuesday

Despite ending Friday’s session on a tepid note, where Nifty registered a loss of 0.14 per cent, Nifty logged gains on a monthly and weekly basis. On a weekly basis, Nifty rose 0.85 per cent and on a monthly basis, it logged gains of 11.39 per cent, which is the second-best monthly performance, as of now, in 2020.

The month of November would be engraved in the record books as Nifty for the first time touched the 13,000 mark. Furthermore, the markets were flooded with liquidity as FII pumped in a record flow of over 65,000 crore, which is the highest ever in a single month.

On a weekly chart, Nifty has formed a Doji candlestick pattern as the price had closed where it opened last week. Further, the formation of this pattern can mean the market may reverse its prior trend; traders should view the Doji as echoing a market in transition rather than being an outright reversal pattern. Based on this, the market participants should wait for the confirmation of Doji as a reversal pattern. Though Nifty has formed a Doji on a weekly basis, Elder Impulse System is continuing its green bar formation and further, there is no reversal on the Heikin-Ashi. Also, if one moves to the monthly chart, Nifty has formed a sizable bullish candle, which clearly indicates that the bulls are in a commanding position.

In the last week, Nifty’s range of 355 points was greater than its prior week but was less than the 10-week average. Meanwhile, on the daily chart, barring Wednesday’s big bearish bar, all other bars had small bodies with shadows i.e. either upper shadow or lower shadow. However, an interesting observation is that after Wednesday’s big bearish bar, the bulls have rebounded strongly but they have failed to pierce the 61.8 per cent retracement level of the big bearish bar. Thus, as long as the level of 13,035 is not pierced on the upside, the price is likely to move sideways. While on the upside, a close above 13,035 levels would open up for further upside towards 13,145-13,220 levels.

Currently, Nifty is trading 2.9 per cent above the 20-DMA and is trading nearly 20.60 per cent above the long-term moving average i.e. 200-DMA, which is very rare. Hence, it is important to be cautious while adding a fresh long position, as a pullback is likely to leap forward.

Overall, we expect Nifty to trade in the range of 12,700-13,145 in the coming week. Meanwhile, traders would be better off focussing on a stock-specific approach.