NIFTY Index Chart Analysis
Nifty made positive closings for seven consecutive weeks. Last week, it closed positive but formed a long-legged Doji at its life-time high. Historically, 7-8 is the maximum number of bull candles. As we enter into the eighth week, Nifty closed with more than half a per cent loss and below prior bar low. Now the question is... Will the rally extend this week too or will it peter out. Till last Friday, on all time frames, there was no weakness visible. But the Monday fall gave some early signals of weakness again. The first sign was that it breached the long-legged Doji’s low on an intra-day basis and engulfed the prior bar.
Secondly, after a two-day fall, Nifty had earlier rallied for 7 to 8 days. But this time, it was limited for only a day. Another important factor to consider seriously is that the RSI divergence was confirmed by closing below the confirmation point. The earlier swing low in RSI was 63.18. On Monday, it closed below this low. This is the real confirmation for the Nifty that the overall market is weakening. The third factor is, for the first time after the breakout of four-month range, the MACD line closed below the signal line, which resulted in the histogram moving below the zero line, which is a serious negative signal. When Nifty PE (above 29) ratio is at an historical high and in a bubble zone, any kind of weakness will lead to serious profit-booking. The other considerable indicators, out performers in recent times, the Mid cap and Small cap indices, looked tired and closed absolutely flat last week. The advance-decline ratio is also negative for a majority of the days in the last 10 days of trading.
The leading sectorial index, Bank Nifty also got the confirmation for negative divergence in RSI (61.32) by closing below 68.61. A series of an indecisive candle at the top hinted at some kind of tiredness seeping in among the bulls. But many a time, they failed to get the confirmation for the breakdown. Last week, Nifty tested the prior high and recorded a new high with a very small margin. Since then, 11,761 became a new resistance for future action. On the downside, the first support is placed at the 11,500-11,488 zone. Any close below this level increases the probability of the index falling up to the 11200 level. On a weekly basis, if it closes below the long-legged Doji low (11,559), it will be another confirmation for the downward move. All the sectoral indices, barring the IT index, closed in the negative and the market breadth was also negative. Now, it is time to be cautious of long positions in Nifty. Any close below 11,488 will lead to a sharper correction.
STOCK RECOMMENDATIONS
HEIDELBERG CEMENT INDIA .................. BUY ................ CMP Rs. 177
BSE Code : 500292
Target 1 .... Rs.205
Target 2 ..... Rs.225
Stoploss....Rs. 164(CLS)
Heidelberg Cement India is trading in a range after breaking out of the 73-week consolidation. There is a cup and handle pattern breakout within the long consolidation phase. In the last two weeks, the volumes were very high and recorded above 50-week average, which is a sign of accumulation. The RSI is above 64.44 and negative divergence is visible. The momentum indicator MACD is also above the zero line and a signal line for the past six weeks. The directional movement indicator ADX (19.25) is also turning up and above the -DI. It is meeting almost all the CANSLIM criteria and 75 per cent of Warren Buffett rules to invest.
Institutional holding increased to 18.44 per cent. The number of FPIs holding this stock rose by 16 to 142 and mutual funds holding stock increased to 45 from 33. Accumulate this stock in the range of Rs.175-181 with stop loss of Rs.164. The initial target is open towards Rs.205 and later it can reach Rs.225.
PVR ................................... BUY .............................. CMP Rs. 1682.70
BSE Code : 532689
Target 1 .... Rs.1770
Target 2 ..... Rs.1825
Stoploss....Rs. 1600(CLS)
PVR is the largest cinema exhibition company (in terms of the number of screens and market share) in India with 748 screens (676 own and 72 SPI) across 161 properties. It has a market share of 25%. The stock is trading at lifetime highs. The stock has broken out of 101-week cup and handle pattern. The stock is currently above the 200-DMA and 50-DMA. The RSI is in a bullish structure and in an upward channel. The MACD is above the signal line and zero line for the third week. The histogram shows the momentum is picking up in the stock. Its consolidated revenue grew 51% YoY to Rs.843 crore, Its net profit grew 79% to Rs.51.8 crore and diluted EPS increased 78% to Rs.11. FPIs increased their holdings by 2 per cent in March 2019 quarter. The number of FII/FPIs holding this stock grew by 19 to 216 in the March quarter. The stock meets virtually all the CANSLIM criteria. Its price strength (RS) and EPS strength is 90 each. There is good buyer’s demand (B) and group rank for the stock. Accumulate this stock above Rs.1680 with stop loss of Rs.1600. The target is open towards Rs.1770 and later Rs.1825
(Closing price as of Apr 09, 2019)