Nifty's forms large candle promising to soar higher

Friday the 13th might have been considered unlucky by some, but for the Nifty, it turned out to be a pivotal day. Early in the session, the index plunged by a hefty 368 points, sending waves of uncertainty through the market. However, as the day unfolded, the Nifty made an astonishing recovery, rebounding fiercely to close with a gain of 220 points, or 0.89%. The intraday rollercoaster saw a dramatic 611-point range, capturing the attention of investors and analysts alike.

Despite ending the week with a modest 0.37% gain, Friday’s sharp reversal was significant. The large candle formed by this surge engulfed not only the week’s trading range but also a major portion of the last two weeks, suggesting that the upward momentum is real.

What made this rally even more promising was the confirmation of an important technical pattern. The much-discussed Inverse Head & Shoulders pattern had already signaled a potential breakout, and last fortnight, the neckline of this pattern was crossed. The Nifty, after testing the neckline, bounced back from it on December 5th with a significant 563-point swing. Last Friday, it repeated this performance, showing that the neckline had become a solid support level.

With Friday's close at 24,768, the Nifty reached its highest closing value since October 16th, and now market experts are forecasting a possible target of 25,400 in the coming weeks. But first, there’s a key level to watch: 25,125. This level represents the 61.8% retracement of the 3,014-point fall from the Nifty’s all-time high in September. If the Nifty manages to close above this level, it will mark a major milestone, potentially clearing the path for new highs in the months ahead.

The Bank Nifty, too, is showing strength. On Friday, it surged with a 1,390-point candle, ending the day 0.69% higher. While it closed the week with a modest 0.14% gain, the Bank Nifty is now just 1.62% away from its all-time high of 54,467. This suggests that the banking sector could be in for a strong performance if the broader market continues its upward trajectory.

Meanwhile, the Nifty SmallCap and MicroCap indices, which had been on an impressive 14-session winning streak, faced a brief correction on December 12th. But even after some intraday losses, they made a strong comeback, though they still couldn’t finish the day in the green. These smaller indices have been the driving force behind the Nifty’s rally, and their resilience is a positive sign for the market.

While the Nifty was charging ahead, the global picture painted a different story. The Dow Jones Industrial Average, representing the 30 major stocks of the New York Stock Exchange, dipped by 0.2% on Friday. This marked its seventh consecutive daily loss, the longest losing streak since February 2020. This bearish trend in the U.S. was likely influenced by anticipation ahead of the Federal Open Market Committee (FOMC) meeting, scheduled for next week. The market expects a 97% chance that the Fed will cut interest rates by 0.25%—a move that could have significant ramifications for global markets.

As markets await the outcome of the FOMC meeting, all eyes are now on what happens next in the U.S. and how the Indian markets react when they open on Thursday. With the U.S. election results still fresh in everyone’s minds, the next FOMC meeting in January could bring new dynamics, especially with Donald Trump’s return to the political stage.

For now, investors in India can enjoy the recovery, but as always, caution remains key. The Nifty is breaking out, and it looks poised for more upside, but market watchers will be closely tracking the next few weeks to see if this rally is sustainable.