Nifty 50 Breaks its Range, Begins Uptrend!

After trading inside a range for a long time, the benchmark Nifty 50 index finally broke above its range and started its uptrend. Since the index plunged after the Fed’s rate hike decision in September 2022, it had more or less been oscillating within a broad range with high volatility. Day’s high closing was followed by a gap down opening the next session and vice versa was keeping traders on their toes with the volatile moves in the index.

But now, as the index surged past its previous peak of 17,428, marked on 6 October 2022, the trend has finally changed from range-bound to an uptrend. From here, the index has essentially become a buy-on-dip market as structurally, the formation of a higher high and higher low has started. Dips from here would be an opportunity for traders to participate in the rally.

The previous trough of this uptrend, which is around 16,950 has now become immediate support for the index and would keep the uptrend intact as long as the market is hovering above this level. On the upside, the next level to which the index could travel is around 17,800 which is quite achievable in a relatively quick span of time.

The current oversold markets in the US are also a positive factor for the Indian market rally and this is exactly what has been playing out in the last two days. A recovery in the Dow Jones index from near 52-week lows has fueled the sentiments in our markets and has worked as a catalyst to the already panning out outperformance of the Nifty 50 index. The US markets have a much higher potential to rally as their markets are near 52-week lows and this is what would keep fueling the Nifty 50 toward higher levels.

However, traders need to be cautious about the enormous amount of global uncertainties looming around that could easily be a spoiler to the party any minute. The risks of the financial stress of Deutsche Bank (ETR: DBKGn ) and Credit Suisse (SIX: CSGN ), liquidity issues in the Japanese bond market, ongoing turmoil in the currency market, the ineffectiveness of increasing interest rates as commodity prices are still keeping inflation at elevated levels etc. are real and therefore overnight hedged positions are recommended to minimize risks despite a clear signal of the uptrend from today.

Today’s gap-up opening has left a gap on the chart which could be filled soon as the market corrects, but any correction till 16,950 would not distort the current uptrend.