Trade Setup for December 16: Friday's swings indicate a bullish momentum

Nifty traders are navigating through turbulent waters after a volatile session on December 13. The session was a rollercoaster, with early losses quickly followed by a sharp recovery. Those who held onto long positions found themselves on the wrong side during the initial downtrend, while short-sellers were caught off guard during the late-session bounce.

The Nifty’s recovery, which surged nearly 600 points from the day's lows at 24,180, brought it back into the 24,500–24,800 range, where it had been hovering for most of the week. The sharp drop of over 350 points earlier in the day left traders on edge, but Friday’s strong bounce has revived hopes for higher levels. This recent recovery is reminiscent of the dramatic swings seen on December 5, where the Nifty dropped to 24,295 before surging back above 24,850.

Looking ahead, the focus will be on key resistance levels, with the December 5 high of 24,857 as the immediate target. If the Nifty manages to break past this, it could eye the 25,000 mark, which still presents some resistance. The Nifty ended the week with a modest gain of 0.4%, marking its fourth consecutive week of upward movement, despite narrowly avoiding a three-week losing streak.

The upcoming week will be heavily influenced by the US Federal Reserve’s policy decision, where a 25 basis point rate cut is widely expected. However, the market will be particularly sensitive to the Fed's commentary on future interest rate expectations, especially with the potential change in the political landscape following Donald Trump’s return to office on January 20.

Key Levels to Watch:

The Nifty’s next resistance is at 24,857, followed by the 25,000 level.

Support levels are seen at 24,650, with the next major target being 25,200, according to analysts.

Institutional Activity:

Foreign institutional investors were net buyers in the cash market on Friday, while domestic institutions were net sellers.

Nifty Outlook:

HDFC Securities' Nagaraj Shetti sees the possibility of more upside, with a target of 25,200. Immediate support is at 24,650.

Kotak Securities’ Amol Athawale highlights the bullish reversal pattern on the daily charts, indicating potential upside towards 25,000-25,200 levels.

Nifty Bank:

The Nifty Bank also showed resilience, recovering from an early plunge below the 53,000 mark to close above 53,500. Despite this sharp recovery, the index ended the week lower, snapping a three-week winning streak.

Key support levels for Nifty Bank are 53,100 and 53,000, with a potential rally to new highs if it crosses 54,000.

F&O Data:

Nifty 50's December futures saw a decline of 2.3% in Open Interest (OI), currently trading at a premium of 62.45 points.

Nifty Bank’s futures shed 3% in OI.

The Nifty 50’s Put-Call Ratio stands at 1.12, indicating a slight bias towards call options.

Stocks to Watch:

Reliance Industries: Acquires a 74% stake in Navi Mumbai IIA for ₹1,628 crore.

Biocon: EMA’s CHMP recommends approval for YESINTEK from Biocon Biologics.

Lupin: Acquires three trademarks from Boehringer Ingelheim for its diabetes portfolio.

Aurobindo Pharma: Positive opinion from EMA for its biosimilar drug Zefylti.

Premier Explosives: Signs an MoU with Global Munition to form a JV in the defense and aerospace sector.

Max Financial: Receives approval from the Registrar of Companies to change its name to Axis Max Life Insurance.

JK Paper: Announces a scheme to consolidate its business operations, merging three subsidiaries.

With these key events, traders will need to remain agile and focused on the Federal Reserve's upcoming decision, as well as the market's response to these pivotal developments.