On Thursday, Nifty snapped its eight-day winning streak and ended the day with a loss of nearly half a per cent.
Interestingly, the broader indices, which were underperforming the frontline gauges over the last couple of trading sessions, were seen outperforming the frontline gauges on Thursday. As a result, the advance-decline ratio went in the favour of the advancers.
Nifty formed a Doji like candle pattern on the daily timeframe. Further, Nifty had formed an inside bar pattern as the price traded within the high-low range of its prior bar. The formation can also be called, a Harami Cross.
Hence, going ahead, the high low of the mother bar, which stands at 12,770 and 12,571, are key monitorable levels on the upside and downside, respectively, in the near term. The current rally (1,234 points) from the lows of 11,535 to the high of 12,270 is similar in nature to the previous impulsive move witnessed during the period of September 24 to October 15 (1,235 points) in terms of points’ gains.
So, if we take into consideration the fact that history repeats itself, Nifty is likely to retrace the 38.2 per cent of its impulsive upmove as it did at the time of its previous impulsive move. The 38.2 per cent retracement level stands at 12,298 levels. Hence, a close below 12,571 could open the gates for a further correction towards the levels of 12,298 in the near term.
Hence, as long as Nifty stays below the level of 12,770, it is better not to indulge in aggressive buying as we expect a round of cool-off or consolidation before the next leap forward. On the downside, the level of 12,571 is a key level to watch out for.
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