Nifty: Bulls in full control
High spirits continued for the second straight day on Tuesday on the back of growth orient announcements in the Union Budget 2021. Nifty opened with a gap-up and went onto touch the high of 14,731 in the morning session. However, soon, opening gains pared and the index traded in a narrow range to settle with gains of 2.57 per cent at 14,648 levels. The broader markets rallied as well but once again, underperformed the frontline indices. Interestingly, the FIIs buying continued as they bought a whopping Rs 6,181.56 crore.
The price action of the day formed a bullish candle along with a gap indicating a continuation of the upmove. After a gap-up opening, the index traded within the first hour’s range throughout the day and sustained above the gap area. The 20-DMA, which was trending down, after a sharp upmove in the last two trading sessions, has started to trend upwards.
Let us examine the previous rapid move, which was witnessed on the back of the corporate tax cut announced by the Finance Minister. The announcement was made on September 20 in two trading sessions. Nifty rallied almost 9.40 per cent but pointwise, it had rallied nearly 1,004 points. Comparatively, both the last (corporate tax cut move) and the current move were pointwise similar in nature; however, in percentage terms, the corporate tax cut announcement was much sharper.
Besides, after a sharp upmove in the two trading sessions, which was witnessed after the corporate tax cut, the index retraced almost 61.8 per cent of the upmove. So, considering the assumption of technical analysis i.e. if history repeats itself, we may assume that Nifty can retrace 61.8 per cent of its current upmove in the coming days. But then, if the index surpasses its high of 14,731-14,754, the rally might extend towards the levels of 14,900-15,000 in the near term.
On the downside, the immediate support for the index is placed at 14,324 as it’s a confluence of 20-DMA and the gap area support. The positive momentum indicator i.e. the +DMI moved above the ADX and -DMI, which is positive for the index.
As long as the index trades above the gap area and the 20-DMA, a buy-on-dips strategy should be adopted.