Index trend and stocks in action December 02, 2019
Throughout the week, the Nifty remained buoyant, barring the correction seen on Tuesday and Friday. In the week passed by, the benchmark index managed to close above the 12,100 mark on Wednesday for the first time and, subsequently, on Thursday marked a fresh all-time high of 12,159. On Friday, it failed to show a follow-through move and tumbled down. As a result, it formed a sizable bearish candle that resembles a bearish Belt Hold pattern. Further, the Nifty has also registered almost two distribution days in the last week. Despite the fall on Friday, the index managed to close the week with a weekly gain of about 1.2 per cent and formed a bull candle with a long upper shadow. The body is almost equal to the upper shadow. This specific price structure indicates that there was profit booking at higher levels.
On Monday, the Nifty might witness a soft opening as a reaction to the macro data and, in that case, the level of 12,000-11,980 is likely to a strong support level. A breach of this support could mean that the index may once again enter into a consolidation and correction phase. To resume its up-move, it needs to clear the 12,100 mark first and sustain above this level. Once, the 12,100 mark is crossed, the next immediate resistance for the index is placed at 12,159, which also happens to the all-time high level.
The daily 14-period RSI is placed at an important level, that is, 61 and for the past 29 sessions, it has managed to sustain above 60-mark.In any case, a move below the 60-58 mark could be a worrisome sign in the coming session as the negative divergence will get confirmation. Interestingly, there is a negative divergence in MACD, too. Moreover, when the index made a new high, the MACD histogram was in the negative zone. This is a rare phenomenon that when the Nifty is at record high levels, the MACD histogram is in the negative zone. However, we would suggest that, before changing the view to bearish bias, let the negative divergences get confirmed with prices.
All-in-all, the Nifty has crucial support placed at the 11,980-12,000 region and traders should monitor price action around these levels. If this level is sustained, one can initiate a long position and look for a re-test of 12,100 mark, followed by 12,159 levels. However, breach of this important support level would mean the index would test 11,800 on the downside.
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