NIFTY Index Chart Analysis : MARKETS CONTINUE TO SWING AND SWAY

NIFTY Index Chart Analysis : MARKETS CONTINUE TO SWING AND SWAY

Nifty recorded gains of 3.51 per cent in the month of October. While the first half of the month was pretty much dominated by the bulls, the second half of the month was impacted by the grim news of another round of lockdowns due to the rising cases of corona virus in other countries, especially across Europe. This shook investors’ confidence in global economic recovery. As a result, there was a spike in the volatility index across the globe and the India VIX level went past the 24 mark.

The architect of the rally in India markets was the heavyweight banking sector represented by Bank Nifty which jumped 11.42 per cent in the month of October.

It had recorded its best monthly gains after May. The advance decline ratio in the month of October was 0.88 and it improved marginally as compared to last month since it was 0.86 in September. The US markets notched their worst monthly performance since March as market participants turned sceptic ahead of the US presidential election. On the other hand, the Indian markets were one of the best performing ones across the globe in the month of October, driven by good corporate earnings and receding corona virus cases as well as a pick-up in economy on account of festival sales.

The month of November started with a strange occurrence – a tug of war between the index heavyweight Reliance Industries and the heavyweight sector i.e. Bank Nifty. On the one hand, Reliance Industries was dragging the index lower as it recorded it sharpest single day fall after March. On the other hand, Bank Nifty went all out to keep the markets stay afloat. And finally, the markets ended in the green, aided by a strong move of over 4 per cent in Bank Nifty. Technically, the index after oscillating for nearly eight trading sessions within the range of the mother bar, which was formed on October 15, breached the range on the penultimate day of October.

However, soon after breaching this range the index took support around the level of 11,530-11,560 as this was a strong support zone defined by the confluence of 50 DMA and the lower end of the channel and also 38.2 per cent retracement level of the entire rise from the September lows. Further, after breaching the range the index did not give any confirmation by forming a significant bearish candlestick pattern., In fact, after formation of a high-wave candle, the index formed a black hammer and an inside bar which met the criteria of uptrend type of inside bar formation as the open and close price of the inside bar was located higher than the open and close of the prior bar.

With the formation of reversal candles it was quite evident the bulls were warming up for a big move and as a result we saw the formation of a bullish candle with a gap-up on Tuesday and moreover, India VIX, which had been seen raising its ugly head, cooled off. It’s quite unusual to see volatility subsidising ahead of the outcome of a big event such as the US’ presidential election. With this the index managed to open and close decisively above the range of the last three sessions but is back inside the broad range of 11,660-12,025. Overall, the trend would be only clear and certain once we breach on either side of this broad range.

Even though the world is closely monitoring the outcome of the US’ election, we believe the outcome could trigger short-term volatility in the markets. Meanwhile, what is awaited is announcement of a fiscal stimulus post the appointment of the American president. The size of the fiscal stimulus would be a key factor which could guide market movement worldwide. Breaching this broad range would result in a swift movement of 250-400 points in the near term. Hence, if we move above the 12,025 mark, there is likelihood we would reclaim the all-time high levels, while a breach of 11,660 would open the gates for correction up to the 11,200-11,000 levels. 

STOCK RECOMMENDATIONS 

AAVAS FINANCIERS  ...................... BUY .......................... CMP Rs 1,465.85

BSE Code : 541988
Target 1 : Rs 1,600
Target 2 : Rs 1,645
Stoploss : Rs 1,380(CLS)


The company is primarily engaged in the business of providing housing loans to customers belonging to the low and middle income segment in semi-urban and rural areas. It provides loans to people who are either self-employed, running small businesses like providing transportation facilities in auto rickshaw or other vehicles, running grocery shops, tiffin centres, beauty parlours and other businesses or carrying out the business of agriculture or animal husbandry products in rural areas or salaried class people engaged in small jobs in the private or public sector. The stock has rallied nearly 85 per cent from the March lows to August highs and thereafter it has been seen moving in a sideways trend. The stock has been forming a base in its weekly chart and is trading nearly 4 per cent away from the crucial pivot point. The stock is meeting most of the CANSLIM characteristics. It has an EPS rank of 96 which is a great score signifying reliability in earnings. The buyer response is good, which is evident from the recent demand for the stock. A group rank of 36 indicates that it belongs to a strong industry group of finance-consumer loans. The Bollinger bands are contracting which has resulted in the formation of a Bollinger band squeeze pattern and this strategy helps us to take advantage of impending expansion in the Bollinger band. The RSI on the daily timeframe has not gone below the 40 mark since the beginning of June 2020. On the weekly timeframe the 20-week moving average is playing a sheet anchor role, and as long as the stock stays above this level stay with it with a bullish bias for a target of Rs1,600 followed by Rs1,645. Keep Rs1,380 as stop loss on closing basis. 

CRISIL  ...................... BUY .......................... CMP Rs 1,945.85

BSE Code :  500092 
Target 1 : Rs 2,150 
Target 2 : Rs2,200 
Stoploss : Rs 1,800 (CLS )


CRISIL is a leading, agile and innovative global analytics company driven by its mission of making markets function better. It is India’s foremost provider of ratings, data, research, analytics and solutions with a strong track record of growth, culture of innovation and global footprint. It is majority owned by S & P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide. The stock has recently witnessed breakout of a seven-week flat base pattern and a large cup and handle formation. After the breakout the stock went on to register a fresh 52-week high of Rs2,124. Thereafter, the stock has witnessed a bout of profit-booking and is approaching near its breakout levels. Hence, this makes a good case to buy the stock. The technical prospects are still promising as the stock is trading close to its 52-week high and is meeting all the criteria of Mark Minervini’s trend template. The stock is trading above the 40, 30 and 10-week averages and all of them are trending up. At the same time, there is a desired sequence. Further, the stock is also meeting most of the CANSLIM criteria. After a breather or corrective decline, the stock is likely to head northwards and can move up to test levels of Rs2,150-2,200 in the short to medium term. The stop loss of this trade can be maintained at Rs1,800 on a closing basis. 

(Closing price as of Nov 04, 2020)
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.

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