NIFTY Index Chart Analysis Wait for actionable movement in the market

Kiran Dhavale

The Indian stock market remains in an indecisive phase for the fourth consecutive week. Most of the indices are gripped within a triangle, which suggests that the market is not certain about which direction it should move. The global equity markets and crude oil prices have inched higher in the last couple of weeks as optimism prevails over US and China striking a trade deal to avoid an all-out confrontation that will severely disrupt the global economy. Meanwhile, Jerome Powell’s comment that Federal Reserve can afford to be patient about the future rate hike added fuel to that optimism On the domestic front, industrial growth unexpectedly slipped below 17-month low in November, an outcome of the post-festival season decline in manufacturing and the unfavourable base effect. The factory output has come in at just 0.5% in November 2018, as compared to 8.1% in October 2018. 

Going forward, the volatility is expected to continue, while investors are keeping keen eyes on the upcoming Q3FY19 results, which could dictate the direction of the market in the short term. On the global front, investors are waiting for the outcome of the trade talks between the US and China. These details may influence worldwide financial markets On the technical ground, the benchmark index Nifty continued to show choppy trend for the fourth consecutive week. Though no major downsides were witnessed, Nifty did not make any major upmove as well. The Nifty and most of the other indices have formed a contracting triangle kind of a pattern and the volumes and price movements are getting squeezed. But, as of now, the momentum in prices has been narrowed substantially and the prices have reached near the apex point of the triangle and the index is likely to give a breakout in the coming days. 

The index has formed a Doji kind of pattern on the weekly time frame, and throughout the week, the index traded within the high-low range of the previous week (Inside Day). The index has been trading below its long term moving averages, i.e. 100-day and 200-day SMAs. On the weekly time frame, the 14-period RSI is struggling at the 50 level and the Average Directional Index (ADX) is continuously falling since November 2018 and currently quoting around 11.57.

In the coming days, the index is likely to remain volatile and face profit-booking at higher levels. Nifty has two important hurdles to cross; one is the 100-day SMA and the second one is the upper trendline resistance of the triangle, which is currently placed at the zone of 10880- 10920. A decisive close above this zone would extend the pullback towards the level of 11090, which is 61.8 per cent retracement of the downside leg from the all-time high to lows of October. On the downside, the zone of 10720-10700 is likely to act as strong support as it is confluence of the lower trendline of triangle and the 50-day SMA, which is currently placed at 10710. A decisive close below this level would open the gate for further correction towards the level of 10530, which is the recent swing low. The bottomline is that the uncertainty around the key events is likely to stoke volatility, advised to maintain a cautious approach till there is some actionable movement in the market. 

STOCK RECOMMENDATIONS 

CASTROL INDIA .......... BUY............ CMP Rs 167.45 

BSE Code : 500870
Target 1 .... Rs 180
Target 2 ..... Rs 190
Stoploss....Rs 151 (CLS) 


Castrol India Ltd is currently trading at Rs 167.45. Its 52-week high and low stand at Rs 214/Rs 134.85 made on April 18, 2018 and October 5, 2018 respectively. Considering the weekly time frame, the stock formed a long-legged Doji kind of reversal pattern at 52-week high and thereby witnessed a correction. The correction was arrested near its support zone of Rs 135-Rs 140. Thereafter, the stock traded in contracting consolidation along with low volumes. Recently, after forming strong base around Rs 140-Rs 145, the stock has witnessed a breakout of contracting triangle on the daily time frame. The breakout was supported by volume spurts and the 14-period day RSI tilted northward, which depicts positive momentum. In the near term, the recent swing low of Rs 151 is likely to act as a strong support level, while on the upside, the stock is likely to head towards the level of Rs 180, followed by Rs 190. We recommend BUY with a stop loss of Rs 151 on a closing basis. 

GODREJ PROPERTIES........... BUY.......... CMP Rs 729.40 

BSE Code : 533150
Target 1 ..... Rs 810
Target 2 ..... Rs 840
Stoploss....Rs 680 (CLS) 


Godrej Properties Ltd is currently trading at Rs 729.40. Its 52-week high and low stand at Rs 917/Rs 462 made on May 8, 2018 and October 10, 2018, respectively. Considering the weekly time frame, the stock formed a reversal pattern shooting star at 52-week high, and thereby fell, making lower tops and lower bottoms, up to the 52-week low. However, the stock has taken support near the 200-week SMA and surged sharply. Recently, the stock has witnessed breakout of contracting triangle on the daily time frame, along with robust volumes. 

Additionally, the stock formed a sizeable bullish candle on the breakout day, which adds strength to the breakout. Meanwhile, it is also trading above its crucial 50-day,100-day and 200-day EMA levels. The daily 14-period RSI is trading in the bullish zone. We expect the stock to touch the level of Rs 810, followed by Rs 840 and the stop loss is suggested at the level of Rs 680 on a closing basis. We recommend a BUY.

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