Trade Setup for December 16: Nifty's repeated attempts signal possible breakout above 26,100

The Nifty snapped its two day winning streak and traded in a narrow range through the session.

After opening on a weak note, the index extended its decline in early trade to hit an intraday low of 25,904. However, sustained buying interest emerged near the 25,900 support zone, lending stability to the market and triggering a sharp rebound from the day's lows.

The Nifty recovered over 140 points from the bottom to close near the session high, ending the day with a marginal loss of 19 points at 26,027.

Indigo, Trent, and Hindustan Unilever led the pack of Nifty gainers, while selling pressure was concentrated in M&M, Eicher Motors, and ONGC, which ended as the major losers.

Sectoral performance was a mixed bag. Media, FMCG, and Consumer Durables ended the day as the top performers. Conversely, Auto, Pharma, and Financial Services were under pressure and ended as major losers.

Midcap and smallcap indices held steady near prior closing, with Nifty Midcap 100 off 0.12% and Nifty Smallcap 100 up 0.2%.

Globally, key economic data due tomorrow include US non-farm payrolls, retail sales, unemployment rate and manufacturing PMI, which will be closely tracked for cues on growth momentum and monetary policy expectations.

Markets are expected to remain in a consolidation phase in the near term, with heightened volatility likely in the broader markets as year end approaches amid thin trading volumes and an uncertain global macro environment, said Siddhartha Khemka of Motilal Oswal.

Nagaraj Shetti of HDFC Securities said repeated testing of the resistance zone could eventually lead to the Nifty breaking decisively above the key 26,000-26,100 band in the short term. A sustained breakout above this zone could open up upside targets of 26,300-26,400, while immediate support is seen at 25,900.

Nilesh Jain of Centrum Broking said that the Nifty faced resistance near its 21 day moving average at 26,030 but managed to close above the psychological 26,000 mark. He placed immediate support at 25,900, followed by the 50 day moving average near 25,770.

On the upside, Jain said a decisive move above 26,100 could push the index towards 26,250. Overall, he added that the broader trend remains positive, with a buy on dips strategy intact as long as the Nifty holds above 25,700.

According to Nandish Shah of HDFC Securities, a sustained move above 26,058 would confirm a short term bullish breakout and open the door for higher targets of 26,202 and 26,330. On the downside, the 25,900 level is expected to provide short term support.

Rupak De of LKP Securities believes the Nifty is likely to trade in a range between 25,900 and 26,100, with a decisive move outside this band potentially setting the direction for the next leg.

Meanwhile, the Bank Nifty shrugged off early weakness to stage a steady recovery, closing 0.12% higher at 59,462.

Sudeep Shah of SBI Securities said the 59,500-59,600 zone is likely to act as an immediate resistance for Bank Nifty. A sustained move above 59,600 could extend the pullback towards 59,900, followed by 60,200. On the downside, the 59,100-59,000 zone is expected to offer strong support.