NIFTY Index Chart Analysis

As expected, the last Nifty upward move came to an end on Friday by closing prior bar low. The weakness continued for Monday. Nifty opened with a gap-down on Monday and continued to be in the negative zone through the day. 

Its open was the high level for the day and the last hour recovery attempt was unsuccessful as it failed to close above the 50 per cent retracement from the day's low. The market breadth worsened to 1:5 on Monday. The interesting point is, it breached the 23.6 percentage level of the low of February 19 low to the high of March 22 (10585.65-11572.80) on intra-day basis. If Nifty spot breaches this level (11,339) on a closing basis, the March 12 gap also will be filled and the recent breakout level will be retested. Also, the banking benchmark index Bank Nifty also got confirmation for Friday's 'bearish engulfing' pattern. The bearish engulfing candlestick pattern is considered to be a bearish reversal pattern, usually occurring at the top of an uptrend. The RSI finally came out of the overbought zone and closed below the previous swing high. All the other major indicators are also giving clear bearish confirmations. The Ichimoku chart of Nifty on 60-minute time frame is clearly giving a negative view as it closed below the KS and TS lines. Another important aspect is the KS line crossing under the TS line, which is also a bearish sign. Now if Nifty closes below the 11,339 level, as mentioned earlier, there is a higher probability of testing the recent fourmonth consolidation breakout level of 10985, or at least 11,080 level, which is 61.8 per cent of downward move started from the all-time high level to the low of October 2018 . 

Before reaching these levels, it may bounce from the 11,225 level, which is the opening gap support zone created on March 12, 2019. The question is how much time will it consume to reach that level.

As per our assessment, it may take another 5 to 6 days to reach there. Bank Nifty also can move below 29,000 and test 28,800 in less than five days or before March expiry. The institutional activity has slowed down and the volumes are also on the lower side because of pick-up in rollovers. Now, the key is, as long as Nifty sustains below 8-EMA (11,414), it is better to avoid long positions in the Nifty. There are many bearish breakdowns visible in the derivative space. We may witness short-covering bounces in the next 2-3 days as expiry is due this week. 

STOCK RECOMMENDATIONS MAHANAGAR GAS ........................ BUY .................. CMP Rs.997.60
BSE Code : 539957
Target 1 .... Rs.1064
Target 2 ..... Rs.1140
Stoploss....Rs.935(CLS) 

The company distributes CNG for motor vehicles and PNG for domestic household use as well as commercial and industrial use. The return on equity (ROE) is very attractive at 23 per cent. Technically, the stock is trading above the pivot level and all long and short term moving averages. It is meeting all the CANSLIM criteria and Mark Minervini’s rules to buy the stock. After consolidating for 44 weeks, it is in the process of moving into stage-2. On the weekly chart, the MACD is above zero line for 12 weeks and above the signal line for 22 weeks. With this consolidation breakout, the ADX, which shows the strength of the trend, turned upside and moved above the -DI. The 14 RSI has entered into bullish zone and is meeting the range shift rules. With these fundamental and technical evidences, this stock can be accumulated in the range of Rs. 975-1000 with a stop loss of Rs.935, with an initial target of Rs.1064 and next target of Rs.1140. 

TORRENT PHARMA ........................ BUY ...................... CMP Rs.1883.65
BSE Code : 500420
Target 1 ..... Rs.1955
Target 2 ..... Rs.2050
Stoploss....Rs.1820 (CLS) 

The company reported a strong 39% YoY growth in revenue in Q3FY19, led by robust growth in formulation sales. Its EPS growth rate is consistently above 75% for the last four quarters. Its ROE is at an attractive level of 15 per cent for the current year and the 5-year average is 31.12 per cent. It 5-year compounded sales growth is 13.25 per cent and compounded profit growth is above 6.88 per cent. The institutions are picking up the stock. In December quarter, the number of FIIs holding this stock rose to 194 and the number of mutual funds holding this stock rose to 25. The stock meets most of the CANSLIM criteria. Trading just 4 per cent to the lifetime highs and pivot. Technically, it is clearly in an uptrend, forming higher highs and higher lows. The stock is trading above all the long and short term moving averages. The leading indicator RSI is in bullish zone and the MACD is above zero line and signal line. The ADX is very strong at 26.66. The -DI is below the +DI and ADX is above the -DI and +DI. This shows the technical strength in the stock. Taking these factors into account, Buy this stock at Rs.1883.65 with a stop loss of Rs.1820. The target is open towards Rs.1955 initially.