Trade Setup for Novemeber 27: Nifty poised for new peaks but will Thursday be the day?

The December F&O series could not have begun on a better note for the Nifty bulls. Recovering everything that was lost over the last three days and a little more, along with closing above key levels has surely got to be music to their ears.

Dealing rooms that CNBC-TV18 spoke to mentioned that 26,120 on a closing basis is a level to watch on the Nifty and a close above that could trigger further short covering on the index, especially considering that FIIs are still around 85% net short in the market at the start of the series.

The Nifty has closed convincingly above that 26,120 level, and the bulls would surely hope that the short-covering moves extend, at least first towards 26,277.35 and then beyond. The index had hit its previous record high on September 27, 2024 and if Thursday does turn out to be that day when new peaks are scaled, it will be exactly 14 months to a new peak for the index.

A major contributor to this upmove, right from 24,500 levels has been the financials; banks and NBFCs alike. The Nifty Bank, already at record high levels, took another step in heading towards the 60,000 mark on Wednesday. Financials, NBFCs and PSU Banks have been well bid through the day.

Another factor that the bulls will take heart from is the broader markets, as the market breadth was a pain point for the last few trading sessions. However, dealing rooms are suggesting that the participation remained on the lower side and the upmove on Wednesday was only a relief rally as most of the stocks were beaten down.

Thursday's session will also be the monthly expiry of the Sensex contracts. As the Nifty has closed at the highest point of the day, the first level to watch on the upside will be the November 20 high of 26,246, followed by the record high level of 26,277.35. Global cues will start to dwindle over the next two days, as the US markets will be shut on Thursday on account of Thanksgiving, and will have an early close on Friday.

Rajesh Bhosale of Angel One believes that traders should continue to have a buy-on-dips approach and avoid contra short trades on the index. He said that 26,100 - 26,000 on the downside will be the immediate support zone, while a stronger base now aligns with the 20-DMA level of 25,850.

"The trend looks positive, shrugging off the recent weak sentiment. Moreover, the RSI has reversed the earlier negative divergence on the daily chart. On the lower end, the index had found support at the 38.20% Fibonacci retracement level on the daily chart before this rally, highlighting the significance of the reversal," Rupak De of LKP Securities said. He added that he sees the Nifty heading towards 26,377 - 26,660 levels in the near-term. 26,000 is strong support for the index.

The Nifty bank too is forming a firm base between the 58,750 - 59,000 mark. With the index being in blue sky territory, any move towards the 60,000 mark may see some resistance at higher levels, but the index has not broken below the 58,750 mark even during the three-day fall, and that will be a key downside level to watch.

"We expect the index to retain its positive momentum and move towards the 60,000 level in the coming weeks, based on the measuring implication of the recent range breakout. A move above that will open further upside towards 60,700 levels in the coming weeks Meanwhile, the 58,500 is likely to act as a crucial support area, with the previous resistance now expected to serve as support," the commentary from Bajaj Broking stated.