NIFTY Index Chart Analysis

The Nifty has come out of the May 23 range and closed at a new life-time high. The BSE Sensex also closed record high above the 40,000 level on Monday. As there is no significant weakness visible in any time frame, one should follow the price as the trend continues to be bullish. Nifty formed a flat base in the range of 11830-12041 for the past 7 days. The auto, metal and FMCG sectors led the market to new highs. 

The IT index is moving higher and closed above the 61.8 per cent retracement of the recent fall. The IT stocks protected Nifty from the fall, while other sectoral indices are underperforming. Technically, Nifty is trading 4.08 per cent away from the 50-DMA and has closed near the upward channel resistance. We are repeatedly mentioning that Nifty can reach 1224012320 level in the current uptrend. The Bollinger Bands expanded and the neckline (20-DMA) is more than 4 per cent away from the price. Generally, 20-DMA works as the magnet of the market as price always tries to be near that level. There are very few instances in the past where the price was too far or more than 4 per cent. The RSI has not yet entered the overbought zone and it is still below the prior swing. The MACD is also still below the April high. This negative divergence in these two major indicators indicates some profit-booking may occur at higher levels. As the Nifty Fibonacci extensions cluster is placed at 1224412312, this zone is going to be very crucial for the Nifty to continue the uptrend. The Nifty and all other sectoral indices, except the Media index, closed with one per cent gains on Monday but, surprisingly, the market breadth is negative as the declines outnumbered the advances. Another interesting fact is that 36 stocks made new 52-week highs, while 76 stocks made new 52-week lows. On the record high day, all sectoral indices ended with decent gains and this divergence is a real surprise for market watchers. Nifty rallied 980 points or 8.82 per cent from May 14 lows. After the exit polls and decisive mandate in the general elections, the market is now moving with hopes of a rate cut. This despite the weak GDP data in Q4 and global growth worries. The US market indices Dow Jones and the S&P 500 are trading in a confirmed downtrend as they are below the 200-day and 50-day moving averages.

On the earnings front, at least 40 per cent of the Nifty companies have not met market expectations. The Nifty priceearnings (PE) ratio is now at the historical high of 29.90. The optimism in view of the new government with more strength in the parliament is buoying the market sentiments. In this euphoric market conditions, we can only manage the risks, not the gains. 

The fundamental rule of a technical trader is: as long as the price does not make any lower low or lower high, continue with the current uptrend. Wait till the price closes below the previous day low to exit the current long positions. With this rule in mind, keep a stop loss at the previous day's low and continue the long positions for the targets of 12244-12312. In case Nifty falls below the 11900 level, better keep away from taking fresh long positions. For medium-term investors, keep 50-day moving average as the stop loss, which is placed at 11615. 

If Nifty closes below 11900, it means the Nifty trying to fill the gap of May 20. Adopt a cautiously positive approach and follow strict money and risk management rules. 

PIDILITE INDUSTRIES .................... BUY ....................... CMP Rs.1277
BSE Code : 500331
 Target 1 .... Rs.1372 
Target 2 ..... Rs.1400
Stoploss....Rs.1225(CLS)

 Pidilite is a market leader in India’s adhesive market with a market share of more than 70 per cent in its leading brand categories (Fevicol) in the organised segment. The company registered a positive EPS growth for two quarters and has maintained consistency in sales growth. With 23 per cent return on equity (ROE) and buying demand from institutional investors, the stock is looking attractive at the current level. Technically, the scrip has closed near the all-time high level and near the pivot. It is also trading above all the moving averages. The MACD is above the signal line for the past nine trading sessions and the histogram indicates that the momentum is picking up. The RSI (62.13) is in the bullish zone. The ADX has just reached above the +DI and -DI and the +DI is above the -DI. This set up shows the strength in the trend. The volumes are above the 50-week average for the last two weeks with price increase, which indicates that accumulation is in full swing. As the stock is in a clear uptrend as it is making higher highs and higher lows, buy this stock at Rs.1277 with a stop loss of Rs.1225. The target is open towards Rs.1372 and Rs.1400 

HAVELLS INDIA ............................. BUY ............................ CMP Rs.776
BSE Code : 517354
Target 1 ..... Rs.835
Target 2 ..... Rs.850
Stoploss....Rs.750 (CLS) 

Havells India is a leading player in electrical consumer goods in India. Its key verticals include switchgears, cables and wires, lighting fixtures and consumer appliances. Its revenue grew by 10 per cent in Q4 FY19. The EPS recorded a growth of 34 per cent on a consolidated basis. It return on equity (ROE) at 19 per cent is meeting the CANSLIM benchmark. It price strength (RS) is at 85 and it is trading above the 50-day and 200-day moving averages with above 20 week average volumes for the past two weeks. The stock is just 2 per cent away from its previous high and pivot point. The stock is in 9-week flat base pattern in stage-2. The MACD histogram is suggesting that the momentum is picking up and the stochastic oscillator’s %K is just above the %D on the weekly chart. The leading indicator RSI is in a triangle formation and any breakout will be a great opportunity to buy this stock. Considering the above evidences, buy this stock at Rs.776 with a stop loss of Rs.750. The target is open towards Rs.835 and Rs.850.



 

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