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Metal, realty, IT, pharma likely to outperform

A small positive candle was formed in the last week, with long lower shadow.

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Last Updated: Jan 13, 2020, 11.54 AM IST
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After showing a sharp upside bounce in the last few sessions, Nifty shifted into a consolidation on Friday and registered a new alltime high at 12313 levels.
By Nagaraj Shetti
Technical & Derivative Analyst - HDFC Securities


Where we are: After showing a sharp upside bounce in the last few sessions, Nifty shifted into a consolidation on Friday and registered a new alltime high at 12313 levels. Friday’s candle pattern could indicate a formation of high wave at the highs. Technically, such formations at the hurdles/ new highs could signal a confused state of mind among market participants. Confirmation of this pattern could result in a reversal.

What is in store? A small positive candle was formed in the last week (as per weekly chart), with long lower shadow. This indicates a strong comeback of bulls from the lower levels. The Nifty is currently placed at the key overhead resistance of intermediate uptrend line (connecting previous two important swing highs) around 11350-11400 levels. This is going to be a key hurdle for the market on the way up. Weekly 14-period RSI has turned flat around 65, which reflects a broaderrange movement in the market.

What could an investor do? The near-term trend of Nifty continues to be positive. Having witnessed a sharp upside bounce from the lows in the last week, it is likely to make an attempt of upside breakout of 12350-12400 levels in this week. The presence of key overhead resistance and sluggish pattern of momentum oscillators could dampen the effort of upside breakout in this week. Any weakness from the highs could find key lower support around 11950-12000. Regular profit-booking from long trading positions and a placement of strict stop loss on longs could be a suitable strategy in the near term. Metal, realty, IT and pharma are likely to outperform while PSU banking, capital goods and energy are expected to underperform.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

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