NIFTY Index Chart Analysis- Nifty in a confirmed uptrend

Nifty in a confirmed uptrend

The Nifty is in a clear and confirmed uptrend. It has more than retraced 90 per cent of the June-September fall. The sharp breakout of 2-month consolidation with the announcement of the corporate tax cut and retesting of the breakout hints at an opportunity to build long positions in the market. There's been more than 7.5 per cent rise in the Nifty in the last 17 trading sessions, and the participation of mid and small cap stocks in the rally is creating a bullish environment in the market. The Nifty on 29th October,2019, has broken out of the downward channel after five trading days of a tight range. 



Interestingly, after the 7.5 per cent rally, the Nifty looks tired with four back to back bearish or indecisive patterns. On Wednesday, it made a bearish belt hold and on the October series expiry day, it made a shooting star pattern. On the following day, it fell below the prior day low, but recovered and closed with a small gain. But it formed a dragonfly doji kind of pattern. These back to back bearish formations suggest tiredness in the rally. On Monday, it formed a spinning top near to the lifetime highs. Before reaching a new lifetime highs, it may experience a corrective consolidation for some period. The immediate 8DEMA support is placed at 11793. Below this level there will be a chance of retesting the channel breakout levels. In such case, the Nifty could test 11580-11510 in the most bearish scenario. At the same time, it needs a close above 12000 for the ongoing uptrend to continue. There is a negative divergence on the hourly chart, but there is no negative divergence in long term charts. Even though there are four back to back bearish candle formations, a very big bullish candle has been formed on the weekly chart. The RSI made a new swing high on the weekly and daily charts as well. This leading indicator is clearly moving in an upward channel and in a highly bullish zone. The MACD line has already reached a higher level than on 3rd June,2019 , which is a lifetime high of the Nifty. The histogram is suggesting a bullish momentum. The Stochastic Oscillator is suggesting an over bought market (Nifty). The bearish patterns on the price and oscillator suggest an overbought condition and indicate at the likelihood of profit booking next week. The trend strength indicator ADX is also in the bullish zone with 25-plus levels. The technical parameters suggest that there are chances of corrective consolidation for a brief period.



For the near future, the underlying price action continues to improve with the positive surprises in Q2. In the current market conditions, investors should focus on non-extended ideas trading above their respective moving averages. One could identify flat base patterns and buy them if the Nifty trades above the 50DMA and with price relative strength (RS) lines at or near new highs. There are several mid and small cap stocks coming out of flat bases. Along with technical strength, a fresh entry should only be taken in stocks that have sound fundamentals with 80 plus EPS strength and 20 per cent growth in sales and earnings.

There are important judgements with regards Ram janmabhoomi, Shabarimala and Rafale to be announced in the next 7 working days. The market could give strong reactions to the outcomes. It's time to be cautious before initiating long positions. Stock specific activity may continue as Q2 results are in progress.

STOCK RECOMMENDATIONS 

DABUR INDIA LTD. ......................... BUY ....................... CMP Rs.481.50 

BSE Code : 500096
Target 1 .... Rs.515
Target 2 ..... Rs.530
Stoploss....Rs.454 (CLS)

Dabur has broken out of the double bottom pattern on the weekly chart with volumes above the 50-week average. It closed near to the prior lifetime high and above the prior pivot level. The stock is trading above the 200 DMA and 50 DMA and both are clearly trending up. The 50 DMA is above the 200 DMA and the golden crossover happened 12 weeks ago. The 30-week average needs to move above the 40 week average for the continuation of the uptrend. The RSI has cleared the downward sloping resistance line. It actually has broken out of an inverted head and shoulder pattern. The MACD and histogram are clearly showing a bullish momentum in the stock. The ADX is also showing strength in the trend. It is also meeting all the CANSLIM parameters. Its relative price strength is as high as 83 and EPS strength reasonably placed at 70. The greater buying demand suggests that institutional investors are active in the stock and accumulated 2.40 per cent stake in the company in the September ended quarter. Its Return on Equity (ROE) is at 26 per cent. and the consistent growth in sales and earnings makes the stock attractive at the current level. Buy this stock at Rs 481.50 with a stop loss of Rs 454. The target is open towards Rs 515 - Rs 530. 


UPL LTD. ....................................... BUY ...................... CMP Rs.605.30

BSE Code : 512070 
Target 1 ..... Rs.645 
Target 2 ..... Rs.665
Stoploss....Rs.575 (CLS)

After 27 trading sessions of tight sideways range, UPL has broken out on the upside with massive volumes. The higher buying volumes have been witnessed post 16th August, 2019. The stock is making higher highs since 13th August, 2019's low, but it took 53 trading days to retrace 50 per cent of the prior down move. The stock fell from Rs 706.9 to Rs 497 in just 26 trading sessions. It took exactly double the time to retrace 50 per cent of the fall. Now, the stock has moved above the 200 DMA and the 50 DMA is trending up. The stock is also moving in an upward channel and formed a triangle kind of shape. The RSI has come out of a squeeze and entered into a super bullish area. It has also broken out of the long sloping trendline resistance after forming a base at 47 levels. The MACD line is about to break the signal line. The histogram is also at the zero level. The surge in +DI is suggesting at the trend strengthening further. Its price relative strength (RS) improved to 80. Buy this stock at Rs 605.30 with a stop loss of Rs 575. The target is open to Rs 645 - Rs 665.



*LEGEND: EMA - Exponential Moving Average.  MACD - Moving Average Convergence Divergence  RMI - Relative Momentum Index  ROC - Rate of Change
RSI - Relative Strength Index

(Closing price as of Nov 05, 2019) 

Disclaimer : Above recommendations are based on various technical parameters and any fundamental input has not been considered for the recommendations. Follow strict stop loss for the recommendation