Trade Setup for Dec 11: Nifty forms bullish hammer pattern; can it break past 24,800?

Nagaraj Shetti from HDFC Securities has highlighted the formation of a bullish hammer pattern on the Nifty, although it’s not a classical one. Typically, such a pattern suggests a potential trend reversal to the upside.

Despite three consecutive days of decline, the Nifty shows signs of bullish undertones. While the index struggles to break above the upper range, the bulls are ensuring that crucial lower levels remain intact.

On Tuesday, the Nifty continued its consolidation phase, showing little movement overall. However, there were moments when Reliance Industries and the major banking stocks, except ICICI Bank, weighed down the index, pushing it down to the 24,500 mark. Yet, in the final 30 minutes, the bulls stepped in, recovering nearly 100 points from the lows, resulting in the Nifty closing just below the flat line, similar to Monday’s levels.

In contrast to earlier sessions, the broader markets did not outperform by a significant margin, though they did end slightly in the green. Stock-specific movements continued to drive action, particularly in response to ongoing newsflow.

The markets now turn their focus to the upcoming CPI data release in both India (on Thursday) and the US (on Wednesday). Wall Street showed caution ahead of the data, and Indian markets are reflecting a similar sentiment. Investors are watching closely for indications of how new RBI Governor Sanjay Malhotra may steer policy during his first meeting in February 2025.

Foreign and domestic investors were net buyers in the cash market on Tuesday, with foreign institutions outpurchasing their domestic counterparts by nearly double.

Nagaraj Shetti observed that the Nifty’s bullish hammer pattern points to potential upside momentum, with resistance levels between 24,850 and 24,900. Immediate support lies at 24,500. As long as the Nifty holds above the 24,400-24,500 range, the bulls remain in control, with dips toward this range viewed as buying opportunities. A breakout above 24,750-24,800 could lead the index toward the 25,000 mark.

Meanwhile, the Nifty Bank index showed resilience, closing nearly 200 points higher and outperforming the Nifty. It ended above 53,500 and remains just 900 points away from its record high of 54,467.

Hrishikesh Yedve of Asit C Mehta pointed out that while the Nifty Bank has formed a green candle, it still faces short-term resistance near the 53,900-54,000 levels. A sustained move above 54,000 could see the index rallying toward 54,500, a new record high. Support remains at 52,500.