NIFTY Index Chart Analysis
The interim budget and the last budget of the BJP government ahead of the 2019 elections proved to be a catalyst for the bulls as the stock markets witnessed a decent rally. However, the blockbuster rally did not last long as it fizzled out after the RBI announced a repo rate cut after 18 months. The rate cut by the RBI, announcement of tax exemptions for the middle and lower income taxpayers and benefits to farmers however failed to lift the overall sentiments of the market as bourses witnessed a steep fall on the last trading session of the week ending February 8, 2019.
On the global front, the US stocks ended flat as the Federal Reserve’s dovish message and decent corporate earnings helped to lift the stocks, while European indices felt the heat after the European Commission cut its forecast for Eurozone economic growth to 1.3% from 1.9% in 2019 amid trade tensions and domestic challenges.
Going ahead, on the global front, the trade talks will be the biggest event in the upcoming week and investors are likely to watch for signs of progress, ahead of a March 1, 2019 deadline on new tariffs. Apart from that, the global market is likely to take note from some microeconomic events like China’s inflation data for January, Japan’s industrial production data for December and US retail sales for December. On the domestic front, consumer inflation numbers and wholesale inflation numbers would direct the markets.
Technically, the benchmark index Nifty bounced from its 38.8 per cent retracement of the upward rally from October 26, 2018 to December 19, 2018, i.e. from 10,005 to 10,985. Thereafter, Nifty continued with its winning streak as it extended its upward rally to the sixth straight session. The index, on the way up, did manage to clear the psychological hurdle of 10,980-11,000. Usually, the breakout from longer consolidation phase will have a faster move and follow-through. But, this time around, it failed to sustain the momentum and closed below the breakout level of 10,950. This resulted into a breakout failure from the longer consolidation period. This is not a good sign.
On the weekly time frame, the price action formed a small body bull candle with a long upper shadow indicating that the market encountered sell-off at higher prices. The 14-period day RSI cooled off after touching the 65 zone and, at present, it is trading below its 9-days average.
In the coming days, the index is likely to witness further weakness as it has given a failed upside breakout. The 200-day SMA is the crucial support for the index, which is currently placed at 10,855 level, and a failure to hold this support level would lead to further correction up to the 100-day SMA, which is currently placed at the level of 10720, followed by 10650. On the upside, the zone of 11120-11180 is likely to act as strong resistance for the index and a follow-through move beyond this level would lead to an extension of the pull-back towards the level of 11350. Traders are advised to adopt ‘sell on rise’ strategy in the coming weeks till the Nifty closes above the resistance zone of 11120-11180.
MINDTREE ............. BUY ............. CMP Rs 900.60
BSE Code : 532819
Target 1 .... Rs 1000
Target 2 ..... Rs 1040
Stoploss....Rs 855 (CLS)
Mindtree Ltd is currently trading at Rs 900.60. Its 52-week high/low stand at Rs 1181.90/Rs 679.30 made on September 11, 2018 and February 19, 2018, respectively. After registering its 52-week high, the stock entered into corrective phase. The correction was halted near 100-week EMA and, since then, the stock is trading with gradual higher tops and higher bottoms. However, at present, the stock has recently given pennant kind of continuation pattern breakout along with decent volumes. With this, the stock has formed opening bullish Marubozu candle on the breakout day, which suggests the bulls are in a dominant position. Thereafter, registering a high of Rs 928.30, the stock retraced and it is currently trading near the breakout price. At present, the stock offers a good entry point. The stock is trading above its 21-day EMA and it is in a rising mode. Considering all the above factors, we expect the stock is likely to touch the level of Rs 1000, followed by Rs 1040 and the stop loss is suggested at the level of Rs 855 on a closing basis. We recommend a BUY.
NESTLEIND ........... SELL ............ CMP Rs 10780
BSE Code : 500790
Target 1 ..... Rs 9725
Target 2 ..... Rs 9500
Stoploss....Rs 11755 (CLS)
Nestle India Ltd is currently trading at Rs 10780. Its 52-week high/low stand at Rs 11777/Rs 7020 made on February 7, 2019 and February 12, 2018, respectively. After registering a high of Rs 11705 on August 31, 2018, the stock has witnessed correction, which was arrested near the 200-day SMA and, thereafter, the stock gradually surged to its 52-week high level. However, considering the daily time frame, the stock had made a double top pattern, which suggests correction before another northward momentum. Currently, it has given a breakdown of upward sloping trendline on the daily scale, along with robust volumes. Additionally, the stock formed a sizeable bearish candle on the breakdown day, which adds strength to the breakdown. The 14-period day RSI is quoting at 35.84, which suggests further negative momentum. The daily MACD stays bearish as it is trading below the zero line. We expect the stock to touch the level of Rs 9725, followed by Rs 9500 and a stop loss is suggested at the level of Rs 11755 on a closing basis. We recommend a SELL.