NIFTY Index Chart Analysis

The stimulus package announced by the Finance Minster last Friday propelled the market. On the expectation of the package and FPI surcharge removal, Nifty rallied about 200 points on Friday from the lows of the day and, on the announcement, Nifty added another 230 points. A 430-point rally from the bottom with highest volumes after election results day gives some positive signals to the market. The two rallies have taken the Nifty above the short term moving averages. The Nifty moved above the 8-EMA and 20-DMA. The Nifty came out of the downward channel and tested the bearish flag breakdown point. The next level of resistance is placed at 11181, which is a prior swing high. If the Nifty is able to close above this level, the first trend reversal signal will be available. The 200-EMA is also placed at 11203. These levels are important for aggressive purchases in the market. 

The medium trend indicator 50-DMA is placed at 11383. The price structure is still in the lower highs and lower lows formation, which indicates a clear downtrend. The prior lower high of 11181 is the first resistance point. The two-day faster retracement has many similarities between March and October 2018 bottoms. These bottoms were formed in 12 and 13 days, respectively, in the double bottom (O Neil’s character) form. Now the current double bottom is also formed in 12 trading sessions. The March bottom confirmation point or a high between is 3.32 per cent and October bottom confirmation point is at 5.02 per cent. Now, the current bottom’s confirmation point is 3.37 per cent from the left bottom. The other significance of these bottoms is faster retracement from the right bottom. The most important thing is there is a positive divergence in all these bottoms. Even on the weekly charts, the divergences of October 2018 and this time are similar. In case Nifty moves above the 11181, we may witness a rally up to the 11396 level. The two days of rally recorded huge volumes after the general election exit polls and results day. Most of the retracements ended at 38 per cent or 50 per cent. But, The last two days' rally extended to more than 61.8 retracemsee if this rally extends to form a bullish hammer or not.ent. This is one factor to be positive. Still another four trading sessions to go in this month, and it has formed a perfect Doji. Let us see if this rally extends to form a bullish hammer or not. 

Will this recovery be just an effort to come out of oversold position? Will the stimulus be enough to overcome the global slowdown? Will the earnings next season give a positive surprise? These are some fundamental questions arising out of this massive rally. In fact, the removal of surcharge on FPIs did not enthuse them. They sold another Rs752.9 crore worth of shares after the announcement. The Nifty Price-Earnings (PE) once again moved into a bubble zone at 27.36. This shows that we are still trading on overstretched valuations. 

Though Midcap and SmallCap indices corrected almost 40 per cent, but they are still a long way to a breakout point. For the next two weeks, 11000-11200 levels will act as a critical zone for the future direction. A breakout above the 11181- 11200 zone will lead to a rally towards 11370-11400 levels. In case Nifty falls below 11000 and sustains for at least two days, then there are chances of going back to the recent low.

BATA INDIA ... BUY ... CMP Rs1509.10
BSE Code : 500043
Target 1 .... Rs1580
Target 2 ..... Rs1622
Stoploss.... Rs1435 (CLS) 

India’s leading and most preferred footwear brand Bata reported healthy revenue growth and better gross margins. Its consistency in earnings and sales growth and return on equity of over 19 per cent looks attractive fundamentally. Technically, the stock has broken out of the 15-week double bottom and registered a new lifetime high. The stock is trading above all the short and long term moving averages. The interesting fact is that the RSI on the weekly chart never drifted below the 40 zone since Jan 2017. The RSI is in the bullish zone all these years in troubled market conditions. The stock is in clear uptrend as it is making higher highs. The recent low took support at 200-DMA and bounced sharply. The MACD is just above the signal line indicating that the positive momentum is building up. Its Relative Price Strength (RS) is as high as 94 with good buyers demand and greater group rank the stock is looking attractive now. BUY this stock at Rs1509.10 with stop loss of Rs1435. 

MCX .... BUY ... CMP Rs912.80
BSE Code : 534091
Target 1 ..... Rs1032
Target 2 ..... Rs1123
Stoploss.... Rs850 (CLS) 

The Multi Commodity Exchange of India Limited (MCX), India’s first listed exchange, is a commodity derivatives exchange that facilitates online trading of commodity derivatives transactions. Institutional investors are accumulating this stock and have increased stake by 2.89 per cent recently. Technically, the stock has broken out of 81-week consolidation and a cup and handle pattern. The breakout happened with reasonably good volumes. The stock is trading above all moving averages and meeting all the Minervini’s trend set up rules. The RSI entered into a bullish zone and closed above the prior swing high. The RSI made higher highs and higher lows in the last 81-week consolidation period. The MACD line is also clearly above the signal and zero line. The stock is also in clear uptrend on Daryl Guppy’s MA set up. The price is above all the moving averages and they are turning upside. The stock is meeting most of the CANSLIM criteria. Its Relative Price Strength (RS) is 90 and EPS strength is as good as 87. The stock has greater buyers' demand and is trading above the pivot level. BUY this stock at Rs912.80 with stop loss of Rs850. The targets are placed at Rs1032 and Rs1123