NIFTY Index Chart Analysis

NIFTY Index Chart Analysis

NIFTY Index Chart Analysis

11710 to act as key resistance for bulls !

The two-day big surge in the benchmark indices is able to recoup the losses of the last two months. With almost 900 points’ net gain in two days, Nifty was able close above the 61.8% retracement of June 3 and August 23 fall. Technically, the Nifty has broken out of 30 trading sessions’ consolidation zone with massive volumes. A record level of cash volumes registered on Friday in the history of NSE. Even the delivery volumes also increased to a record level. This shows that the event of the finance minister’s announcement of the corporate tax cut changed the sentiment to the bullish side. The massive gains of Friday and Monday moved the Nifty above the 50, 100 and 200 DMAs. As I mentioned earlier, any close above 11,181-11,200 will lead the Nifty to the levels of 11,370 and 11,540.



On Friday, the big surge faced resistance at 11,382 levels and closed below the 11,370 levels. The triangle breakdown on Thursday negated or failed with this move. The failure triangle breakdown has now ended with an upside breakout. As long as these breakout levels are protected, there will be a positive bias. The sudden surge in index has changed the structure of the market. Technically, as Nifty made a higher high and high low, it entered into an uptrend from the sideways consolidation of a downtrend. This needs to be followed through many days from now to continue the uptrend. The accumulation days are important to strengthen the market.



Distribution days will certainly weaken the market. If the market witnesses a negative close of more than 0.25% with above average volumes, it indicates distribution. We are just 500 points away from lifetime highs. Now the key resistance is placed at 11,710, which is a swing high and 11,790 which is at 78.6 retracement level. Once these levels are taken out, the Nifty can retest the lifetime highs. As the market structure hascompletely changed in just two days, and the fundamental benefit of the tax cut has already been priced in, it is time to be cautious too. More than 62% recovery of 73 days of a fall in two days will definitely attract profit booking.

The Nifty has now closed out of the Bollinger Bands. As a rule, the price must come into the bands before moving to a further high within two to three days. As the monthly expiry is on cards on Thursday, it may be possible to retrace to the extent of 11,480 and 11,324 levels. At the same time, Nifty also faced resistance at the prior upward channel support line and formed a spinning top candle pattern which is indecisive in nature. If this happens, the gap of Monday, September 23, also will be filled. Any huge rise, generally, attracts consolidation for some period on a corrective of flat base mode. In any case, the corrective consolidation extends the fall that may extend towards the 11,218 and 11,181 levels.

Any fall to these levels can be utilised as a buying opportunity. Any fall below 11,180 only turns to bearish. There is a higher probability of forming an inside bar next week or the price action may be within the limits of Friday’s low and Monday’s high. We need to wait until the end of the euphoria and let the market cool off. In this process, the market will behave typically and this pattern may give future direction to the market.

The long-term trend depends on the improvement in the earnings. Unless the earnings improve at an expected level, the market may not make new highs. After a series of baby steps, the ‘big bang’ announcement by the government has changed the sentiment of the market.

STOCK RECOMMENDATIONS


ICICI BANK ............................ BUY ............................ CMP Rs.434.45

BSE Code : 532174 Target 1 .... Rs.470 | Target 2 ..... Rs.540 | Stoploss....Rs.410 (CLS)



India’s leading private sector bank closed at lifetime highs on Monday. It also has broken out of its bullish flag pattern with huge volumes. Interestingly, the stock has also broken out of the three-year-long upward channel and entered into an uncharted area by closing above the prior pivot level of Rs.443.90. An almost 17% jump in just two days may attract some profit booking in the stock. This may lead to retesting of the breakout level. The 20-period RSI took support at 50-level multiple times in the past year. Now it has entered into the super-bullish zone, above 61. The double bottom kind of pattern is clearly visible in the RSI on a weekly chart. The MACD line is about to move above the signal line and above the zero line. On a daily chart, it has already reached above the zero line. The stock is trading above the short and long-term moving averages. It also meeting Minervini’s trend setup rules. The relative price strength (RS) is as high as 91. Last it recorded above-average volumes indicating accumulation. Institutional investors have increased their stake by 1.51 per cent. As the banking sector is one of the biggest beneficiaries of the recent corporate tax cut, ICICI Bank will be the front-runner reaping the benefits. Buy this stock at the current levels with a stop loss of Rs 410. The target is open to Rs.470 in the short term. Above this continue with your position for the target of Rs.540 in the medium term.

KEI INDUSTRIES .................. BUY .............................. CMP Rs.516.30

BSE Code : 517569 Target 1 ..... Rs.600 | Target 2 ..... Rs.650 | Stoploss....Rs.475 (CLS)



KEI Industries is India’s electrical peripheral company with the largest distribution network in the country. The stock has registered its lifetime high on Monday and closed near to breakout level. It is in clear uptrend and making higher highs and higher lows. The stock is moving in an upward channel. Within the channel, it has broken out of an inverted head to form a pattern with higher volumes. The stock is trading above the all short and long-term moving averages and the moving averages are turning bullish. The 20-periods RSI is forming a triangle and about to break out. As it is trading above the 60-levels, the indication is a sign of bullish strength. The MACD line has crossed over the signal line above the zero line. Volumes registered above the 20-week average on Monday suggest accumulation. There are accumulation bars in this stock for the last five-week period. Institutional investors have increased the stake in the company by 3.81 per cent in the last quarter. Its relative price strength is as high as 94 and EPS strength is at 97. Its return on equity is at 24%, registering above 20 per cent growth in sales and EPS, thus meeting all the CANSLIM characters other than group rank. Buy this stock at the current levels with a stop loss of Rs 475. The targets are open towards Rs.600 and 650 in the medium term.

(Closing price as of Sept 25, 2019) 


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