NIFTY Index Chart Analysis : OMG! ITS OMICRON NOW!

NIFTY Index Chart Analysis : OMG! ITS OMICRON NOW!

The global and domestic equity markets are breaking down as fears of the new Omicron variant send shivers down the spine across the globe. As the bears tightened their grip, equity benchmarks across the globe nosedived during last week. Barring the pharmaceutical sector, all the sectoral indices collapsed over 3-5 per cent last week. Lack of leadership from the defensive stocks and heavyweights pulled down the market to its 13-week low. It registered one of the biggest weekly falls in the last 18 months as the Nifty went down by 509.80 points on Friday. During last week, Nifty declined by 744 points or 4.18 per cent and settled at just above the level of 17,000.

The market breadth has been extremely negative during the last three weeks. The selling pressure from the FIIs intensified as they had already sold over Rs31,124.46 crore during the current month, which is the highest this year. On the monthly chart, Nifty registered the biggest fall on Friday after April 12 and formed a big bearish body candle. Even after this big fall, Nifty corrected only 9.79 per cent or 1,822 points from the recent top. Earlier, during February-April, the correction was limited to 8.3 per cent. Any correction above 10 per cent is categorised as a clear downtrend. A majority of corrections were limited to just 5 per cent. Forming a bearish engulfing candle on a monthly chart confirmed the previous months’ shooting star candle’s bearish implications. To avoid the bearish implications of this pattern, the Nifty needs to close above the level of 17,672 that currently does not seem probable. Interestingly, the 100-day moving average is violated and the 50 DMA has begun its downtrend. As cautioned earlier, 80 per cent of the head and shoulders’ target has been met.

Importantly, the benchmark index decisively closed below the downward channel support too. It retraced 50 per cent of the rally from the low of July 28. In any case, if it fails to move above 17600, the next support is at 16,694, which is a 61.8 per cent retracement level. It would be a strong support zone. Nifty entered into a near oversold zone as the RSI reached 32.2. The weekly RSI is below the April swing low. This is a clear sign that strength is weakening in the market. The index closed much below the lower Bollinger band and there is a possibility of bouncing back into the bands. Any recovery in market sentiment may lead to a technical bounce towards 17,478.

The broader market suddenly went into a bearish grip. As many as 16 stocks in the Nifty 50 closed below their 200 DMA last weekend. The Nifty 500, representing 95 per cent of the market capitalisation, is just hanging on the 100 DMA support. Importantly, across sectoral indices, the relative performance is declining. Strong and leading sectors like IT, metals and pharmaceutical are nowhere near the leading quadrant. Sectors in the leading quadrant such as realty, media, energy and the PSU banks are losing their momentum. As Nifty breached the long rising trend-line support drawn from the March 2020 lows, it shows that the 18-month long uptrend is matured and signalled a reversal.

The weekly MACD also has given a fresh sell signal. The distribution day count at six is also a bearish sign. As the market is in a clear intermediate downtrend, avoid new purchases for now. With the above evidence, the outlook is very negative and any bounce towards the 17,200-17,300 range will be an opportunity to trim down the portfolio. The 150 DMA is the key support for the near term. Along with the 61.8 per cent retracement level, it could act as support for now.

STOCK RECOMMENDATIONS

KOPRAN LTD ............... BUY .............. CMP Rs 258.85

BSE Code : 524280
Target 1 : Rs 305
Target 2 : Rs 340
Stoploss : Rs240 (CLS)

Kopran is an integrated pharmaceutical company manufacturing a large range of products that include both active pharmaceutical ingredients and finished dosage forms. It has state-of-the-art manufacturing facilities and products with various accreditations and approvals by major global regulatory authorities. It exports to over 50 countries. Two products were commercialised during the last six months. And research and development for another two products has been completed. Technically, the stock has broken out of a 16-week cup pattern. For the last four weeks, the volume has been above average and indicates accumulation. The stock is trading well above the key moving averages and 19 per cent above the 50 DMA and 39 per cent above the 200 DMA. The MACD gave a fresh buy signal last week and the histogram shows strong momentum. The RSI is in a bullish zone. As the stock is at a new lifetime high, the ADX is very at 36.84 and displays trend strength. It is above the +DMI and -DMI. The Elders impulse system shows a bullish sign. The Mansfield relative strength is at 2.62 and indicates outperformance compared to the broader market. It is also above the anchored VWAP resistance. In short, the stock is in a strong bullish zone. A move above Rs261 is positive and it can test Rs305 with medium-term target of Rs340. Maintain a stop loss at Rs240. 

APOLLO HOSPITALS ENTERPRISE LTD. ...............BUY ........... CMP Rs 5,726.65

BSE Code : 508869
Target 1 : Rs 6,056
Target 2 : Rs 6,552
Stoploss : Rs 5,410 (CLS)

Apollo Hospital was established in 1983 as India’s first corporate hospital. It is acclaimed for pioneering the private healthcare revolution in the country and has emerged as Asia’s foremost integrated healthcare service provider with a robust presence across the healthcare ecosystem, including hospitals, pharmacies, primary care and diagnostic clinics and several retail health models. The group also has telemedicine facilities across several countries along with health insurance services, global projects consultancy, medical colleges, medical university for e-learning, colleges of nursing and hospital management and a research foundation. The stock is trading at a new high with better relative strength.

After an eight-week cup breakout, the stock has consolidated within the range for the last eight trading sessions. It is comfortably placed above its key moving averages and around 22 per cent and 49 per cent from 50 DMA and 200 DMA. Its relative price strength is at 75. The Mansfield relative strength is as high as 4.15, a better strength compared to the broader market. The stock is above the anchored VWAP. For the last two weeks, the volumes recorded above average and show accumulation. The weekly ADX of 56.03 shows solid strength in the trend. The MACD histogram displays strong momentum. The RSI is in a strong bullish zone. A move above Rs5,700 is positive and it can test Rs6,056 in the short-term and Rs6,552 in the medium-term. 

*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 29, 2021)

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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