NIFTY Index Chart Analysis

NIFTY Index Chart Analysis

The GDP data and the other economic data points spoiled the decent breakout in the Nifty. The Breakout on Thursday seems to be a failure as Nifty closed below the breakout level and added distribution days. Currently, the fall is three-day-old. Since October 9th every fall is limited to 2 or 3 days only. Let’s watch if the fall extends beyond two or three sessions and breaks below the 21DMA. The breakout after a series of indecisive or bearish bars in November has given an early suspicious outlook about new highs. However in the last week of November, where Nifty registered bulk of the gains, the sentiments were revived. Having said that , for the three days Nifty is forming consecutive bearish belt hold patterns, with open as high, and forming lower highs and lower lows. Even though the benchmark index, the Nifty made a new lifetime high, it also registered two distribution days in the last week. Normally, this formation signifies a failed breakout. If we observe the data till last Friday, there are several evidences pointing out tiredness in bulls. 

On a weekly chart, it formed a long upper shadow with very little or no bottom shadow. The body is almost equal to the uppers shadow. This specific price structure indicates that there is a probability of the market witnessing profit booking. On a monthly chart, the Nifty formed a spinning top at lifetime highs. Generally, spinning tops are formed at the peak of any rally. Interestingly, there are several other factors that are showing markets are exhausted and the rally has extended without fundamental support. At the same time, the technical evidences are showing the extended overbought condition. The RSI clearly shows a negative divergence in the Nifty. In any case, the RSI currently at 61.24 reaches below the 59 levels, the negative divergence will give a confirmation to the bearish move on the Nifty. Till then, any bounce above the 69 in RSI will negate the divergence implications for some time. 

The Stochastic oscillator has been in an overbought condition for the past five weeks. Until now the market has been in buy on dips condition. Interestingly, there is a negative divergence in MACD too. When the Nifty made a new high, the MACD histogram is actually in the negative zone. This is a rare phenomenon that when the market is at lifetime high MACD histogram in the negative zone. Even in Jan 2018, Aug 2018 and June 2019, when the market was at a new high MACD histogram was in green territory. Incidentally, the negative divergences were visible in June 2019 as well. Before, changing the view to bearish bias, wait for the negative divergences to confirm. Any close above the Friday high will also negate the negative view. Now, with Tuesdays fall the RSI confirmed the negative divergence breakdown by closing below the prior swing low. The MACD histogram further increased indicating the bearish momentum. In any case Nifty close below 21DMA is the first signal for the bearish move. If Nifty further closes below prior week’s low of 11919 or minor swing low of 11883, it will confirm the bears upper hand and up trend will be challenged. Only in case of moves above the prior high 12159, the rally will continue to new highs.

TORRENT PHARMACEUTICALS

BUY .............. CMP Rs1874.95
BSE Code : 500420
Target 1 .... Rs1990
Target 2 ..... Rs2020
Stoploss.... Rs1785 (CLS)
 

After a failed breakout in April-May 2019, the shares of Torrent Pharmaceuticals fell by 26 per cent from its lifetime high. The stock has formed a bottom at Rs1,480 level and bounced 33 per cent in the last 87 sessions by making lifetime highs. The relative strength index (RSI) entered into a super bullish zone which currently stands at a mark of 60.10. The stock is clearly in uptrend as it has been trading above all the short and long term moving averages. All the moving averages are trending up too. The moving average convergence/divergence (MACD) histogram is showing a bullish momentum in the stock. The stock is meeting many of the CANSLIM criteria. The stock is in Stage 1 consolidation and near to the pivot. Its price relative strength (RS) is 83 and earnings per share (EPS) strength is at 64. The good buyers demand (B+) indicates that the institutional investors are active in this counter. The institutional investors increased their stake by 10.59 per cent in September 2019 quarter end. Its return on equity (RoE) is reasonably good that is, at 15 per cent. The double digit growth in sales and earnings and earnings stability looks attractive. Buy this at Rs1,874.95 with a stop-loss of Rs1,785. The medium target is placed at Rs1,990 and Rs2,020. 

GLAXO. PHARMACEUTICALS 

BUY ........... CMP Rs1685.55
BSE Code : 500660
Target 1 ..... Rs1790
Target 2 ..... Rs1820
Stoploss.... Rs1600 (CLS) 


GlaxoSmithKline Pharmaceuticals Limited is a global leader in branded pharmaceuticals, vaccines and healthcare products. With the recent stellar performance in September quarter, the stock has reached to its prior pivot point. After gaining more than 37 per cent from the highs in 10 months, the stock sharply recovered more than 50 per cent from the bottom in just four months. Now the stock has reached multi-year sloping resistance line. The accumulation volumes are increasing since the last two months. The current sharp upmove is similar to the upmove in early 2018. The four-year downward channel has come to a critical resistance area now. As the indicators are very bullish, there is a higher probability of breaking upside. The relative strength index (RSI) on the weekly chart is in super bullish zone with a mark of 75.50. The moving average convergence/divergence (MACD) histogram is showing the bullish momentum in the stock. The stock is trading above all the short-term and long-term moving averages. It is also meeting the buy rules of Rahul Mohindar Oscillator (RMO) trade model as well as all the CANSLIM characteristics. It formed a 63-week cup and handle with 37.22 per cent depth. Its price relative strength is at 93 and EPS strength is at 84. A good group rank and greater buyer demand (A) indicate that it is the darling of smart money. Buy this stock at Rs1,685.55 with a stop-loss of Rs1,600. The medium-term target is placed at Rs1,790 to Rs1,820. 

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