Nifty Tomorrow: Prediction, outlook and Trend for 23rd Dec 2020

Medium Term Trend:  ☝UP (Changes to Down below 13131)

Nifty up 138 points @ 13465 : Volatility to the fore 

Yesterday Markets saw a steep fall of 600+ points intraday and dropped to 13100 levels from 13700+ levels. However this correction was pending and we had already discussed about it in Fridays post. In the previous post we had mentioned that -

"...now the time has come to become cautious about this upmove and not carry long positions blindly"

"...any weakness emerging on the price chart should not be ignored. Its not the time to be overconfident and but to be cautious and one should be on the look out for danger signs that might begin to appear.

"....but we can ensure that we are prepared for one (correction) when it comes and not let markets catch us offguard"

We had also discussed the reasons ( mainly RSI sitting at 80+ and repeated formation of 'hammer pattern' on daily charts). Now many have been asking me that hammer pattern is a bullish candle as it signifies support emerging at bottom and all technical analysts and books also teaches the same thing so why we thought it was negative sign? Well there is this common understanding but we have never believed that all 'hammer' patterns are bullish infact they can be an advance warning of market nearing its top area. The timing of such candle formation is important and hence shouldnt be ignored. When such candle forms at bottom after a big fall then it can be positive but if its forming nearing top area then it could suggest exact opposite (not always but most of the times). This is something I have learnt from my experience and which you wont find in any book.

Point is we were expecting a correction and hence had liquidated our long position on Friday itself around 13700 levels. Anyways, market today opened around 13400 levels, fell towards 13200 but recovered again to 13400+ levels and again formed a 'hammer' pattern. But looking at todays 'hammer' pattern it could actually be bullish.

We have always believed that nothing should be judged basis correction of just one day (even if the correction is 500-600 point long). Hence inspite of such a hectic fall, we maintain the medium term of Nifty as 'UP'. However for short term the upmove is definitely dented and Nifty needs to show strength above 13500 levels to move back in bullish zone. Nifty Daily RSI which had moved to 80+ on Friday crashed to 55+ yesterday and closed just below 60 today. Hence markets are no longer in overbought zone now (just one day fall has pulled markes back from overbought zone).

Going forward market has some resistance at 13560-75 levels above which 13800-14K can be reclaimed. On the downside Nifty has a support at 13225 levels and below that its Monday low of 13131which must be protected if the bullish run is to continue. If we see further weakness below 13200 levels and market goes to break 13131 then probably a bigger correction on bigger time frame could begin.

In Nutshell, inspite of Mondays fall, the trend still remains up and though markets have taken a beating, maintaining strength above 13500 levels for 2-3 trading sessions should put nifty back on bullish track. It would be unwise to get get carried away after seeing yesterdays huge fall and start shorting markets yet. Its only once Nifty start trading below 13100 that one should start thinking about going short. In either scenario, it makes sense to observe markets for some time before taking a fresh trading call.

Happy Trading

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