Nifty volatile again, may break 13.7k barrier

The equity market maintained the momentum for the second day and continued the recovery. It recovered over 70 per cent of Monday's manic fall. Nifty advanced by 134.80 points and closed at 13,601.10. The IT, Pharma and Metals led the market today. Across the board, participation continued for the second day. Realty sector was top gainer with 3.94 per cent. The volatility index India VIX further cooled-off. The advance-decline ratio is in favour of advances. As we mentioned in the previous column, the Nifty is moving in a similar fashion post big falls in the recent past. It took three to four days to move higher or lower than the big bar. Two days spent already and retraced over 62 per cent of the fall. As we forecasted, it moved above the 5 and 8EMAs and continued the recovery for the second day.

The technical structure did not change much, even though over one per cent gains for the second day. The last two-day' move is within Monday's bar. The Nifty opened on a positive note, sustained and maintained the momentum till the closing. It closed at near day high and formed a bullish candle.

It has given confirmation to the previous day's hammer candle. Now the question is, as the long weekend is on the cards, a day before Christmas, a Santa Claus rally or a pause with profit booking will take place. Unless the Nifty moves below13,550-538 (5&8EMA levels) be with a bullish bias. A close below these levels of support zone will lead to consolidation.

The general rule of a hammer is, once it gets confirmation, the next three days will move in a positive direction. So, in any case, if the Nifty moves in the positive direction for the next three days, then the question is will it cross the previous close or not. A close above 13,777 is a fresh breakout and will continue the rally. A close below 13,370 will be negative for the market in the near future. Keep these levels in mind while building the trading strategy. But, the volatility may be back in action as the retail positions exceeded the institutions' positions in derivative segment. The absence or less participation of the institutions may lead to consolidation within the broader range.

(The author is financial journalist, technical analyst, trainer, family fund manager)