NIFTY Index Chart Analysis Nifty takes a bearish reversal, 11390 to act as crucial support

We had talked of cautiousness in the Indian stock markets where the benchmark and broader market indices witnessed lack of upside momentum. The bulls were moving up, but with no momentum and with weak market breadth. Finally, the bears grabbed the control and Nifty hit below the 11500 mark, which we had mentioned in the previous issue. Despite some correction in the global oil prices, rupee continued to plunge, depreciating to its new life-time low of 72.49 amid continuous dollar purchase by the importers and bankers. The continuing US-China trade war and the strong US job data report helped the dollar surge further against a basket of currencies. The US added new jobs for 95 months in a row, while the unemployment rate remained near the historical low levels at 3.9%. The US economy added 201,000 jobs, while the average hourly gains increased by 2.9% as against a year ago. 

On the domestic front, the mixed auto sales numbers dragged the auto index down, followed by the weak manufacturing and services PMI numbers to 51.7 and 51.9, respectively, all of which added to the negative sentiments. The weak global cues, currency pressure and weak domestic macroeconomic numbers offset the positive news on the GDP growth front. The GDP data posted a robust growth of 8.2% in the first quarter of FY19, its highest ever growth in two years. The RBI has forecasted FY19 GDP at 7.4%. Further, the inflation numbers, followed by the factory output data, would drive the markets in the coming sessions and the unfavourable numbers would provoke the RBI to announce another rate hike. Technically, for now, we can say that our benchmark index Nifty has witnessed profit-booking after rallying almost continuously since July 2018. Last week, Nifty had witnessed open-high at the 11751.80 level and formed a kind of a 'hanging man' pattern which, if confirmed during the current week, can drag Nifty further down in the next few sessions. The bearish reversal in the Nifty last week was supported by high volumes and the 14-period RSI negative crossover in the overbought zone. Considering the daily time frame, Nifty witnessed a 'double whammy' pattern, displaying a 'belt hold' as well as 'bearish engulfing' patterns on September 3, which got confirmation in the next trading session. Nifty witnessed a hammer on September 5 and gave two more hammers, with higher tops and higher bottoms up to 50% and 61.8% retracement of the downward move from 11751.80 to 11393.85. Thereby, after a breather of two days, Nifty yet again retreated breaching its previous low on September 10.

Going forward, if bears continue to drag the markets down, we hold 11390-11340 as the immediate supports, followed by 11295. Below 11300-11295, we hold 11235 as the support, which would act as provisional trend reversal. Currently, Nifty is in the corrective mode, and if it bounces back due to short-covering, we hold 11570-11600 as the immediate supports-turned-resistances, followed by 11660. Above 11750-11760, Nifty would see yet another rally. 

STOCK RECOMMENDATIONS 

TATA CHEMICALS........... BUY.......... CMP Rs 748.90 

BSE Code : 500770 
Target 1 .. Rs 787 
Target 2 ..... Rs 820 
Stoploss....Rs 698(CLS) 

The stock of Tata Chemicals is currently trading at Rs 761.40. Its 52-week high/low stand at Rs 786.95/ Rs 578.20 made on May 4, 2018 and September 7, 2017, respectively. Considering the daily time frame, the stock has been trading in a broad range of 125 points in the range of Rs 665 to Rs 780, where the level of 655 acted as multiple resistance-turned-support. After hitting the recent high of Rs 782 on September 3, the stock formed a shooting star pattern and thereby witnessed correction for two trading sessions. However, the stock corrected only near the 38.2% retracement of the prior upward rally, which was also above its 20-day EMA support level. The stock formed a Doji on September 5 and thereby it has bounced back. The bounce is supported by huge volumes and oscillator's positive crossover above 55, suggesting upside momentum. Anticipating a range pattern breakout in the near future, we recommend a BUY. 

LUPIN LTD........... BUY............ CMP Rs 946.90 

BSE Code : 500257 
Target 1 ..... Rs 1010 
Target 2 ..... Rs 1040 
Stoploss....Rs 875 (CLS) 

Lupin is currently trading at Rs 956.65. Its 52-week high/low stand at Rs 1090/Rs 723.55, which were made as on October 30, 2017 and May 15, 2018, respectively, portraying a downtrend. During its 52-week low period, the stock formed a rounding pattern with resistance at Rs 946 level. The stock witnessed a sharp downfall, wherein it tumbled up to Rs 787. The stock bounced back sharply up to Rs 897 and retreated again near to Rs 787-801 levels. Thereafter, the stock rose yet again with higher tops and higher bottoms forming a kind of W-pattern on the daily time frame. Considering the weekly time frame, the stock has formed a kind of cup and handle pattern. The whole formation was supported by huge volumes build up and oscillator's positive crossover above 60. On the weekly chart, the stock has breached 50-period EMA level and the gap between the prices and 100 and 200 period EMA levels has narrowed. We recommend a BUY.