Nifty Index Chart Analysis
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Ever since the low of 6825 was registered on the Budget day there has been no looking back for the bulls as the Nifty index marked its winning streak for the fourth consecutive week and the index has added about 900 points from the low on the back of consistent buying from Foreign Institutional Investors (FIIs), FIIs bought more than 15,000 crores worth of equity shares and another element which is offering the cause some assistance is the hopes of rate cut in the upcoming RBI monetary policy which is due on 5th April, 2016.
On the weekly time frame, Nifty index formed a ‘Bullish Marabuzo’ Candlestick pattern; this indicates that buyers controlled the price from the opening to the close of the week. This pattern is considered as very bullish pattern, since it was a truncated week relevance of this pattern is of lower magnitude as we had only three trading session in a week. At present, the zone of 7730-7750 is acting as a stiff resistance levels which are also 61.8 per cent of previous up-move from 6863 to 9119.20 levels.
Now going forward the zone of 7730-7750 will act as a crucial resistance zone for the index. In case, if Nifty succeeds to hold above this resistance zone than it’s likely to witness further up-move up to levels of 7990-8100. If index fails to clear the resistance zone of 7730-7750 it’s likely to enter into a sideways to corrective phase. In this case, the zone of 7550-7600 will act as a strong support zone for the index. If this support zone is pierced along with volumes it’s likely to witness further downside up to levels of 7345. The coming two weeks are very critical for the market as two important events are scheduled first one is Future and Option expiry for the March series and second one is RBI Monetary policy. Traders will keep a close eye on development of these two events as these are likely to provide further steam to the markets.
On the daily time frame, Nifty has formed a ‘Doji’ Candle against previous days stalled or Deliberation pattern. The Doji pattern implies tug-of-war between buyers and seller’s whereas the previous day’s deliberation pattern provides early warning that the uptrend is weakening. On the daily chart the index has filled the downside gap which was formed on 7th January, 2016. In addition, the index is hovering near to its important long term moving average i.e. the 200-day EMA which is placed at levels of 7780, this 200-day EMA act as an important trigger. It act as an important support if the index trades above this moving average and on other hand if the index trades below this moving average its act as an resistance point. In this case, the 200-day EMA will act as an important resistance point as the index has been trading below 200-day EMA since a long time.
Overall, the zone of 7750-7780 will act as a strong resistance for the Nifty and failure to hold above these levels will create strong possibility of negative bias. However, if Nifty succeeds to trade above the zone of 7750-7780 it will open gates for levels of 7850 and 7970. On the downside immediate support for Nifty is placed around 7640, if trades below this level it will open up for levels of 7530 which is 61.8 per cent retracement levels of previous fall from 7979 to 6826 levels. However, the major support for Nifty is placed around levels of 7400. Once this level is breached index will start its journey to fill the gaps which were created in the recent up-move.
The daily momentum oscillator RSI has managed to trade above 60-63 levels, which is bullish indication for the index.
At present the index is trading above its important short-medium term moving average i .e. 21-day EMA (7496), 50-day EMA (7466) and 100-day EMA (7589). On the other hand it is trading below its important long term moving averages i.e. 200-day EMA (7780). This indicates that trend for the short-medium term is in the favour of bulls and the long term on the daily chart is in the favour of the bear’s.
Conclusions (After Putting All Studies Together)
- The short term trend is in the favour of the bulls; as it’s trading above important short term moving averages.
- The Intermediate trend has been shifted towards bulls, however, if the index trades below 7400 it’s likely to witness shift to the bears.
- The Long term trend is down as index has been forming lower top and lower bottom pattern on the weekly chart and it has been trading below its 200 day EMA on the daily chart.
BUY MAHINDRA LIFESPACE DEVELOPERS:
The stock is currently trading at Rs 428. Its 52-week high/low stands at Rs 560/ Rs 401 were made as on September 21, 2015 and June 19, 2015. On the daily time frame after registering high of Rs 560 the stock entered into a corrective phase and formed sequence of lower top lower bottom pattern. At present, the stock prices have witnessed a bounce back from its crucial support zone around levels of Rs 410-418 as defined by the horizontal trend line and it has formed a reversal candlestick pattern as well. The momentum oscillator RSI has formed a positive divergence. Positive divergence occurs when the prices move in the downward direction but an indicator starts to rise. Considering the bounce back of stock prices from the vital support zone as defined the horizontal trend line and the observation of positive divergence on RSI, traders can initiate a long position in the stock with stop loss of Rs 400 for a price target of Rs 462-475.
SELL HINDALCO INUDSTRIES:
The stock is currently trading at Rs 83.25. Its 52-week high/low stands at Rs 145.10/ Rs 58.80 were made as on May 11, 2015 and February 12, 2016. On the daily time frame, the stock after registering its 52-week low in the month of February, 2016 has formed sequence of higher top higher bottom. The stock has multiple resistances in the zone of Rs 92-95. At present, the stock tested its multiple resistance zone and post testing it witnessed a huge sell-off and during this process it formed a bearish pattern i.e. ‘Bearish Engulfing’ Candle as on March 28, 2016. The momentum oscillator has seen a sharp decline from the overbought zone. Considering the bearish candlestick set up formed on the daily chart and sharp decline in the prices from the supply zone we recommend to short sell this stock with stop loss of Rs 95 for a target price of Rs 72-65.