Fear mongering headlines, lack of ammunition & fatigue at the top had knocked the bulls off their perch in December 21 session. Thereafter, the trend reversed as index could not conjure any follow through move on the downside for rest of the truncated week.
Resilience was shown by Nifty IT index & select pharma stocks as Street put aside Monday's setback and rallied back to its recent peak. It marked a high of 13,772 (whiskers away from all-time high) in Thursday's trade before settling the day with gains of over 1 percent at 13,749.
This week's sharp pullback in index is also accompanied by a recovery in breadth. Nifty index breadth has bounced back post Monday's session from 29 percent to 70 percent (i.e. percent of Nifty50 stocks trading above short-term 20-DMA), implying that corrections have been shallow. Similar such recovery is also seen in breadth of Nifty500, too.
As per weekly close, Nifty snapped its seven-week winning streak, although presence of large weekly lower shadow indicates renewed buying interest at lower levels. Post three days' advance, zone of 13,450-13,500 could turn out as near-term support; mild consolidation is possible; post that we expect resumption of Nifty's northbound journey.
Despite recent chaos & underperformance of last one month, BankNifty is trading above the support of upward sloping 45 degree trendline & 10-column average on point & figure chart. Low pole reversal is also currently at play as per P&F parlance. Going ahead, we expect this leadership index to attempt 31,000 mark.
Nifty Pharma index has been slowly & steadily making a comeback, ratio chart of shows Nifty Pharma/Nifty has given a 45-degree trend line breakout. Series of Bullish Anchor columns are seen since second week of November 2020, followed by double top buys and ratio has been moving higher with the support of its single column average, implying outperformance of pharma stocks against the benchmark index.
Nifty IT index stood out in this week's trade as ratio chart of IT/Nifty held on its point of polarity zone. Defending its short-term confluence support zone, ratio bounced back sharply, suggesting outperformance of IT stocks. On standalone P&F chart, Nifty IT index has been moving higher with the support of its objective trendline.
Following recent corrective action in December 2020, action picked up in Adani group stocks. Our customised Equal-weighted Adani index bounced back post Monday, as low pole reversal & double top buy signal was generated on P&F chart. This customized index has been moving higher with the support of its 10-column average and objective trendline. We expect action to continue in Adani group stocks in near term.
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