NIFTY Index Chart Analysis

Domestic stock markets bounced back from the crucial support level and settled on a positive note. Markets are still trading within the range since last four months. Nifty continued to fluctuate within October’s trading range for the fourth consecutive month, which is an exceedingly long consolidation phase, where the stock-specific activity is driving the market. This time the attempt may be fruitful after five failed attempts to crack the resistance on a weekly closing basis. The advance-decline ratios have been better since last four trading sessions, which is also a good sign for the market. The small-caps have rebounded from the critical support level. Historically, the small-cap and mid-cap indices bounced after 13 months in 2008 and 2012. This time too, after a 13-month fall, the indices are bouncing convincingly, and they have already retraced more than 23% from the recent swing low. In the five trading sessions, both the indices have recorded a gain of around 5%. Even the much broader index Nifty-500 is also outperforming in the overall market. With these pieces of evidence of a pick-up in small-caps and mid-caps, let us wait for the large-caps to lead the market. Let us hope this time the benchmark Nifty-50 also bounces from the consolidation mode. 

On Monday, Nifty reclaimed the 50-DMA and closed above the 200-DMA after 8 trading sessions. But the 200- DMA is absolutely flat and has lost its curving nature as a trend indicator. This oscillation in and around the 200-DMA in a consolidation phase is not giving and decisive signal. The Directional Movement Index is still not showing any strength in a trend as ADX and +DI is still below the -DI on the daily chart. The MACD is about to a crossover the zero line, which is a positive signal. In every dip, the market is finding support with renewed buying interest. Let us watch whether this latest buying interest since the last three trading sessions can lead to a breakout above the resistance area. If Nifty is able to sustain for at least two days above the 10,985 level, there are chances for the index to reach 11,110. It is also a recent failure breakout level. Only above this, the Nifty can look at the target of 11300-11400. If this becomes a reality, then we can say that more positives are in the pipeline. But in case Nifty fails to move above 10985 and remains below the 10850 level for a week, it can once again re-test or break the support of 10585. If Nifty remains within this range (10585-10985), we can expect market to consolidate some more time. The expected either side breakout will lead to a sharper move up or down. The positional trader will have to wait for the breakout and take a position accordingly. A breakout above 10985 sustaining for two days will mean Nifty will reach 11110 and above. Or if it violates the 10585 level on the downside, it will go down sharply to 10000. Hence, you need to strategise your self with strict risk management. 

STOCK RECOMMENDATIONS 

NIIT TECHNOLOGIES ............ BUY ........... CMP Rs 1318.00 

BSE Code : 532541
Target 1 .... Rs 1380
Target 2 ..... Rs 1425
Stoploss....Rs 1270(CLS) 

NIIT Technologies Ltd is currently trading at Rs 1318. Its 52-week high and low stand at Rs 1425 /Rs 820.80 made on September 3, 2018, and February 26, 2018, respectively. After registering 52-week high, the stock witnessed correction. The correction was arrested near 38.2% retracement of the prior uptrend. On the weekly chart, it formed a cup and handle pattern with 27.69% depth and in the last 25 weeks. Now, it is just 2% below the pivot and volumes are reasonably good. The 14-period RSI took support at 44 level historically many times and this time also it bounced exactly from the same level. It is trading much above the 20-day, 50-day and 200-day daily moving averages. The handle is forming in a tight range of just 6%. Due to the narrow range, the Bollinger Bands have contracted, which indicates an early signal of a bigger move. This stock can be bought at CMP of Rs 1316.25 with stop loss of 1270. The targets can be in the range of Rs 1380-Rs 1425. 

MANAPPURAM FINANCE............ BUY.............. CMP Rs 112.90 

BSE Code : 531213
Target 1 ..... Rs 130.45
Target 2 ..... Rs 148
Stoploss....Rs 98 (CLS) 

Gold loan focused NBFC Manappuram Finanace is currently trading at Rs 112.90. Its 52-week high and low stand at Rs 130.45/66.40 made on May 9, 2018 and Oct. 8, 2018 respectively. After making 52-week high, it broke 88-week rising wedge pattern and retraced up to 61.8% of the prior uptrend. It is trading at short-term and long-term moving average and the golden crossover happened three weeks back. The leading indicator RSI valued at 67.64 is in super bullish zone. The ADX and +DI is above the -DI, which indicates positive strength in the stock. The MACD is also above the zero line and signal line. Since last two days, the price consolidation with small body candles on top means taking some rest before taking further upmove. Buy this stock at the current market price with a stop loss of Rs 98. The immediate target is Rs 130.45. Once it clears the previous 52-week high of Rs 130.45, it can reach Rs 148 in the short term.