Nifty recovery from the day's low in the last hours of the trade helped the index form a small bodied bullish candle that resembled a hammer pattern on the daily chart. however, formed a bearish candle on the weekly Chart as the closing was lower than the opening level.
Nifty opened higher at 12813 but witnessed some selling pressure in late morning deals to hit the day's low of 12730. Nifty recouped losses in the afternoon to hit the day's high of 12892, before signing off the session at 12859, up 87 points.
Nifty came back strongly on after declining 1.3 percent the previous day to recoup some of the losses, as banking & financials, FMCG and IT stocks led the rally.
Although the market showed high volatility in the first half, a sharp recovery was seen in the market which was strongly supported by the banking sector. Banking indices are marching towards its pre-COVID valuations in spite of concerns over NPA recognitions. Global markets are moving cautiously amid a rise in the covid related cases and conflicting views over US fiscal stimulus. The overall market momentum going forward will depend on the progress associated with the effectiveness of vaccine distribution, a major factor determining economic recovery.
We reiterate our view that the prevailing consolidation is healthy and traders should focus on a stock-specific trading approach. While we’re seeing noticeable interest in the rate-sensitive pack, we expect fresh traction in select counters from the defensive pack i.e. FMCG, IT and pharma after the recent consolidation so suggest planning the trades accordingly. In absence of any major trigger, COVID-related updates and global cues will remain on the radar.
The hammer is a bullish reversal pattern formed after a decline. A hammer consists of no upper shadow, a small body, and long lower shadow. The long lower shadow signifies the stock or the index testing its support, where demand was located and then bounced back.
Bulls made a roaring come back from the intraday low of 12730 level which resulted in a Hammer kind of formation on daily chart but weekly charts depicted Spinning Top kind of indecisive formation. Moreover, despite Friday's strong upmove, trading range for the week remained 233 points, which is a cause for concern, hinting at a pause in the ongoing momentum.
Considering the last price behaviour in the last two sessions, Nifty could consolidate in a range of 12963/12730.
Traders can retain a positive stance as long as the Nifty sustains above 12730 and the index's strength will be confirmed on a close above 13000 adding in such a scenario, the upswing may initially get extended towards 13200. If the index breaches 12730, then it can slip to 12600 level.
Traders to remain focussed on stock-specific opportunities by avoiding index movement.
Nifty Midcap index was up 0.85 percent and Smallcap index gained 1.2 percent amid positive market breadth.
-Someshwar Technical analyst, Equidius Research
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