NIFTY Index Chart Analysis
RULED BY THE FEAR FACTOR
Spooked by weak global cues and fears of a second wave of corona virus infection as well as resulting economic uncertainty, the bulls’ express found itself stopping in its tracks. If this was not enough, geopolitical concerns flared up between India and China and the stock markets retaliated with a face-off, thereby witnessing high volatility. As quoted by Adam Hamilton, “Markets tend to be relatively calm on a daily volatility basis when greed reigns, and incredibly chaotic when fear rules the roost.” As a result, Nifty experienced a movement of almost 317 points on Tuesday, which was greater than the 10-day average of 226.
On Tuesday, Nifty opened the session above Friday’s highs. However, it was not able to sustain above the important psychological 10,000 mark even for an hour. Thereafter, it slipped lower and took support near Monday’s low and finally ended the day with net gain of about 100 points at 9,914. With negative news flows coming from all corners, the uncertainty kept the market participants on their toes. As a result, the sentiment indicator which gauges market volatility, India VIX, has once again started to rear its ugly head as it has jumped nearly 8 per cent during the week.
India VIX has almost retraced 78.6 per cent of the February-March sharp up-move and on the weekly timeframe a higher high and higher lower has been witnessed. Despite the recent wild swings, if we observe the past three trading sessions, in all of them there is one common thing which is the staging of a recovery from the lower levels. On Friday, after a big gap-down, Nifty made an open equal to low and recovered almost 4.5 per cent from the lower levels. On Monday and Tuesday as well, Nifty recovered almost 90 and 190 points from the day’s low. Furthermore, the bulls have managing to defend the rising 20-DMA, which is positive.
Going ahead, only a closing below 20-DMA could possibly give strength to the bears. Meanwhile, on the upside, the level of 9,980 followed by 10,040 is likely to act as an immediate resistance level. Sustaining above this level, Nifty may test its 100-DMA and the rising channel which is formed on the hourly timeframe. The zone of 10,145-10,156 is strong resistance for the index in the short term. Over the last seven trading sessions, the index is trading within the limit of 100 and 20-DMA. On the higher side, the 100-DMA is acting as a strong hurdle for the bulls and on the downside the 20-DMA is acting as a strong support. Hence, breach on either side could lead to a strong directional move.
The daily MACD has given a negative crossover as MACD trades below its signal line. The RSI on the hourly timeframe is trading in a rising channel. Going ahead, we expect the markets to oscillate in a broad range of 9,700-10,200 and only a decisive break-out of this range could lead to a trending move. However, traders need to approach this range-bound trading cautiously as we expect volatility to rise. Hence, traders need to adjust their position sizing accordingly and follow strict stop losses. Trend traders can focus on stock-specific action as the market is likely to reward traders with stockspecific trades. Hence, be selective and trade with proper stop loss in the coming days.
STOCK RECOMMENDATIONS
ESCORTS ............................. BUY ............................. CMP Rs 958.55
BSE Code : 500495 | Target 1 .... Rs 1080 | Target 2 ..... Rs 1120 | Stoploss....Rs 920 (CLS)
Escorts is one of India’s leading engineering conglomerates and for over seven decades it has helped accelerate India’s socio-economic development through it presence across the high growth sectors of agriculture machinery, construction and material handling equipment and railway equipment. Technically, the stock has witnessed breakout of Stage 1 cup pattern and the stock is trading up by 7 per cent from its pivot. The Stage 1 cup pattern has a length of 59 days and a depth of 42 per cent. The stock is meeting majority of the CANSLIM criteria. Its price relative strength is as high as 95 and EPS strength is at 94. The greater buyers’ demand indicates that accumulations from the institutions are very high. Institutional investors increased their stake in the company by 8.67 per cent YoY in the last quarter. Also, the number of fund holding increased 8.62 per cent YoY in the last quarter. The stock also meets Mark Minervini’s trend template. It is trading above 40, 30 and 10-weekly moving averages and all of them are trending up. At the same time, they are in the desired direction. The stock is clearly uptrend and the trend strength is extremely high. The average directional index (ADX), which shows trend strength, is as high as 47.63 on the daily chart. Generally, above 25 levels is considered as a strong trend. This structure is indicating bullish strength in the stock. Considering the technical setup the stock can continue to move higher and hit a price target of Rs 1,080 and Rs 1,120. Traders can keep a stop loss of Rs 920.
TORRENT PHARMACEUTICALS .................. BUY .............. CMP Rs 2498.30
BSE Code : 500420 | Target 1 ..... Rs 2700 | Target 2 ..... Rs 2840 | Stoploss....Rs 2300 (CLS)
Torrent Pharmaceuticals, the flagship company of Torrent Group, is one of the leading pharmaceutical companies in the country. It is a pioneer in initiating the concept of niche marketing in India and is ranked amongst leaders in the therapeutic segment of cardiovascular (CV), central nervous system (CNS), gastro-intestinal (GI) and women healthcare (WHC). The stock is trading about 6 per cent away from its all-time high levels. It had registered an all-time high of Rs 2,699 as on April 9, 2020 and thereafter it entered into a corrective phase, which halted near the 2,225 levels. The recent corrective decline from the higher levels halted near the 2,280 levels; hence, the band of Rs 2,225-2,280 presents strong support for the stock. Currently, if we look at the daily chart, it is undergoing a consolidation phase and the stock is expected to resolve higher out of this consolidation as all the trend indicators are displaying strong trending features. As the stock is trading near to its lifetime high, it is trading above the 40, 30 and 10-weekly averages. The leading indicator RSI is in bullish territory on the weekly timeframe. Further, the directional movement index is also at a strong point. The ADX is at 26.95 and +DI is above the -DI. Hence, the stock can be bought for an up-move towards Rs 2,700 followed by Rs 2,840 in the medium term. Stop loss for trade can be maintained at Rs 2,300.
*LEGEND: EMA - Exponential Moving Average. MACD - Moving Average Convergence Divergence RMI - Relative Momentum Index ROC - Rate of Change RSI - Relative Strength Index
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.