NIFTY Index Chart Analysis

Nifty needs to close above 11167 to gain positive strength 

The recovery from the 61.8 per cent retracement level of Oct-June rally faced resistance at 200-DMA on Friday. Since Tuesday, Nifty formed higher lows on the daily chart. Nifty also faced resistance at 38.2 per cent level of July 17-August 5 fall. But it closed above the 23.6 per cent retracement level of June 3-August 5 downswing. This is a very early signal of recovery. The rally attempt needs some more follow-through days to continue the rally. The overall cash volumes are higher than the previous week. But there is not much accumulation witnessed at the bottom levels. The bearish pattern, a shooting star, appeared at the multiple resistance levels, which is a concern for the coming days. The derivative data indicates that the long unwinding happened on Friday as there is a long weekend. As there are only three trading sessions this week, traders are not showing interest in carrying forward the positions. Technically, we need to wait till Nifty closes above the 200-DMA (11167) to gain positive strength. 

Historically, the market correction can be classified into three distinct categories. First, 11-13 per cent correction from the top; second, 25-30 per cent correction; and third, 50-60 per cent correction. Now, Nifty has corrected 10.91 per cent from the June 3 top of 12103. But a majority of the listed stocks corrected 25-80 per cent.

This shows the broader market weakness. Even heavyweight like Reliance is trading near its 52-week low. By breaching May lows and 61.8 per cent retracement on intra-day basis on August 5, Nifty has given a long-term bearishness. But the recovery on hopes of some of the current and previous budget proposal rollbacks need some actions. The broader Nifty-500 index is much below the 200-DMA. The Nifty-50 and Nifty 500 indices also faced resistance at 14th low point. Apart from this, all the indices are still below the short to medium-term averages. Most of the indicators came out of the oversold condition and are showing some strength with two days of attempt to rally. The leading indicator RSI is now at 42.27 and needs to move above 50 to breach the prior swing high and confirm the counter-trend rally. The MACD line is about to cross the signal line. If the MACD histogram moves into positive zone, them the upside momentum will also pick up. On the directional index, the bearish strength is still higher than the bullish strength as +DI is much below the -DI. Any close above 200-DMA will lead to the levels of 11245 to 11354. 

The medium-term trend indicator 50-DMA is at 11574. To reach this, there must be support of huge buying interest. For the next three trading sessions, 11224 will act as a resistance point and 10980 level can see strong support. Any negative close on the first trading session of the next week will resume the weakness.

STOCK RECOMMENDATIONS 

GLAXOSMITHKLINE CONSUMER HEALTHCARE ....... BUY .......... CMP Rs. 7,875.25 

BSE Code : 500676
Target 1 .... Rs. 8400
Target 2 ..... Rs. 8800
Stoploss....Rs. 7600 (CLS) 

GSK Consumer Healthcare globally owns some of the world’s best-loved healthcare brands. Consumer healthcare business is focused on five key areas: pain relief, respiratory, oral healthcare, nutrition/gastro intestinal and skin healthcare. In India, it is a leader in the health food drinks business. Its flagship product Horlicks leads the market, while Boost is among the top three health food drink brands in India. The company’s earnings are growing at more than 30 per cent since 2017. Its return on equity is at 24 per cent. Technically, the stock has formed a 30-week cup and handle formation and it is just 1 per cent away to the pivot level. It Relative Price Strength (RS) is at 87 and EPS strength is 84. It also formed a 48-week flat base at the top and an ascending triangle with parallel highs and higher lows. The RSI closed above the previous swing high, which is an early indication of the probable breakout. The MACD line is above the signal line, which indicates the positive momentum. Is also trading above all the short and long term moving averages. By meeting all CANSLIM characteristics, the stock is worth buying at Rs. 7875.25. Keep a stop loss at Rs. 7600. The target is open towards Rs. 8400 and Rs. 8800. 

AARTI INDUSTRIES ................... BUY ........................ CMP Rs. 1,768.95 

BSE Code : 524208
Target 1 ..... Rs. 1955
Target 2 ..... Rs. 2055
Stoploss....Rs. 1700 (CLS) 

Aarti Industries Ltd. (AIL) is a leading chemical and pharmaceutical intermediates manufacturer with a global presence. The company plans to expand its product portfolio and its existing capacities. The company’s earnings are growing at a pace of more 45 per cent on an average since last four quarters. Its return on equity is at 18 per cent. The institutional investors increased their stakes in the company to 23.67 per cent and the number of FIIs invested in this stock increased to 166. Technically, the stock is in a clear uptrend as indicated by higher highs and higher lows on the weekly chart. The stock formed a 9-week double bottom pattern and it is just 2 per cent away from the pivot level. The stock is also trading above the short and medium-term moving averages. Its Relative Price Strength (RS) is as high as 93 and EPS strength is at 94. The RSI has entered into a bullish zone. The MACD is above the zero line and signal line on the daily chart. BUY this stock at Rs. 1768.95 with a stop loss of Rs. 1700. The targets are open towards Rs. 1955 and Rs. 2055. 

(Closing price as of Aug 09, 2019) 

*LEGEND: 
EMA - Exponential Moving Average.
MACD - Moving Average Convergence Divergence
RMI - Relative Momentum Index
ROC - Rate of Change RSI - Relative Strength Index