The stock market is an ever-evolving landscape, where fortunes can change in the blink of an eye. One such recent phenomenon that has caught the attention of traders and investors alike is the Nifty rally.
A Look at The Nifty Rally
The Nifty rally on Thursday ended 173 points higher, testing the immediate hurdle of the short-term moving average, i.e., the 20-EMA. However, despite weekly expiry, it failed to surpass it.
Understanding The 20-EMA Hurdle
The 20-EMA or the 20-day exponential moving average represents the average of prices over the past 20 days, with more weight given to recent prices. It is a short-term moving average that technical analysts use to gauge the market trend. In this case, the Nifty rally tested this level but couldn’t break through, indicating a crucial resistance point.
What Does This Mean For Traders?
For traders, this presents an opportunity. The rally is likely to continue over the next few trading sessions as the index is in the process of retracing the fall it witnessed from 22,526 – 21,710. The key retracement levels are placed at 22,118 – 22,214. So, intraday dips towards the support zone of 21,950 – 21,930 should be used as a buying opportunity.
The US Market Scenario
The US market scenario also played a significant role in influencing the Nifty rally. The tech-laden Nasdaq led Wall Street higher on Thursday as chip stocks rallied following Micron Technology’s upbeat forecast. Investors took comfort in the Federal Reserve sticking to its three-rate-cut view for this year.
Implications for The Indian Market
The positive global market conditions have a direct impact on the Indian market. This is primarily because foreign institutional investors (FIIs) have a substantial influence on the Indian market. A positive global market scenario encourages FIIs to infuse money into the Indian market, leading to a rally.
The Nifty Bank Scenario
Parallel to the Nifty rally, the Nifty Bank also showed promising signs. After settling with cuts for 9 trading sessions in a row, the Nifty Bank closed in the green on Thursday. The index rose by 374 points to close at 46,684 while the Nifty 50 closed 172 points higher above 22,000.Looking ahead, De predicts that the Nifty could potentially extend its gains towards the range of 22,250-25,300. Moreover, a breakthrough above 22,300 may initiate a rally towards 22,500 and beyond. The buy-on-dips strategy is expected to remain viable as long as the Nifty maintains levels above 21,840.
Evaluating The Market Sentiment
Overall, the market sentiment is in favor of the bulls. As of Thursday, 2,749 stocks ended in the green, while 1,076 names settled in the red. This bullish sentiment is expected to continue and could potentially influence trading strategies on Friday.Given the above factors, here are some trading strategies that could be effective on Friday:
Buy-on-dips strategy: As the bullish sentiment prevails, the buy-on-dips strategy could be beneficial. Traders could consider buying stocks during intraday dips, especially those nearing the support zone of 21,950 to 21,930.
Stocks showing a bullish bias such as those of Five-Star Business Finance, Varroc Engineering, UNO Minda, Sapphire Foods, CIE Automotive India, and Praj Industries, could be on the radar of traders.
The Nifty rally and its robust bullish reversal have undoubtedly stirred up the market. While it presents a promising trading opportunity, it’s crucial for traders to stay updated on market trends and make informed decisions. As we gear up for Friday’s trading session, the words of Jatin Gedia of Sharekhan resonate aptly, “Intraday dips towards support zone 21,950 – 21,930 should be used as a buying opportunity.”