What should be the next step after a parabolic rise?

After recording the nastiest decline in the run-up to the Budget in the last 10 years, there was a change in the fortune of D-Street as the bulls registered the best weekly performance since the first half of April 2020.   

On Friday, Nifty registered a fresh all-time high and touched the milestone of 15,000 levels on an intraday basis; however, it failed to close above this landmark level. Interestingly, all through the last five trading sessions, Nifty ended in the green. As a result, on a weekly basis, Nifty gained 9.46 per cent. Moreover, on all five trading sessions and month-till-date, the FIIs have bought shares worth Rs 13,595.15 crore.  

Nifty has witnessed a parabolic rise of almost 10 per cent from the lows of 13,661.75 and the index has almost doubled from the March lows; however, after such a mammoth run-up, the index might enter into a consolidation phase just like any sprinter, who after a quick run, stands for a few moments to catch his breath. And signs of the same have already started to appear as on Friday, Nifty trimmed almost 90 points from the day’s high while on the daily chart, it formed a high wave-like pattern. The formation of a high wave candle at an all-time high level indicates a confused state of mind among the market participants.   

However, the picture on the weekly chart is showing no signs of exhaustion despite a strong upmove in the last week or from March lows. As on the weekly chart, Nifty has formed a long bullish candle, which has completely negated the bearish implication of last week's bar. As there are no signs of weakness on the weekly timeframe, it is wise to be with the trend and hence, buy-on-dips should be adopted in the coming week.   

For the coming week, important support is placed around the gap area (14,336-14,469) of February 2 as the 20-DMA is placed around 14,429.81 levels. Hence, the gap area is a crucial zone to watch out for in the near term. On the upside, Friday’s high of 15,015 is likely to act as an immediate resistance, followed by 15,080 levels.