Nifty approaches towards resistance level, be watchful!
If you happen to tell a story about a 'comeback' to your grandchildren, I'm sure you would mention the events that took place on January 19, 2021, wherein the bulls made a strong comeback on D-Street after two days of corrective action. Not only this, there was one more historic comeback witnessed on Tuesday, which was of the Indian cricket team that made a strong comeback to lift the Border-Gavaskar Trophy in Australia.
Nifty started off the session in a style and there was no looking back for the bulls as the latter were in complete control from the word 'go' and as the day progressed, they tightened their grip to settle with gains of 1.68 per cent at 14,521 levels. Interestingly, all the sectoral indices participated in the rally, and the broader markets outperformed with Nifty Mid-cap and Small-cap soaring 2.32 and 1.72 per cent, respectively. Also, India VIX fell by over 6 per cent, which was yet another positive takeaway for the day.
The price action formed a bullish candle after two back-to-back bearish candles in the prior sessions. With this, Nifty negated its formation of lower top & lower bottom, which we had seen in the previous sessions. Technically, Nifty closed above the short-term averages (5-EMA and 8-EMA) decisively.
Further, the index has retraced 78 per cent of the entire downmove from 14,653-14,223. What we have witnessed is known as a faster retracement as Nifty took three sessions to move from 14,653-14,223; however, it retraced nearly 78 per cent of the downmove in just one trading session.
Going ahead, the bias remains positive as the index on the lower timeframe witnessed a breakout of the bullish flag pattern. Having said, we should not ignore the fact the index is approaching a hurdle, which is placed around the levels of 14,561-14,580. Also, the RSI on the 60-minutes timeframe is turning down from near about the 60-mark, which is not an encouraging sign. On the daily timeframe, MACD is bearish as it trades below the signal line.
On the downside, immediate support for the index is seen around the 14,430-14,400 zone. Only a close below this zone would result in further weakness in the index.
Overall, the index is approaching resistance levels and once this resistance zone is cleared, the momentum is likely to continue, which could propel the index towards fresh record highs.