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NIFTY Index Chart Analysis

NIFTY Index Chart Analysis


NIFTY Index Chart Analysis

11061 to act as near term support for Nifty

Technically, Nifty closed below the long-term average of 200 DMA and added two distribution days last week. Before breaching the 200 DMA, it first breached the 100 DMA on Tuesday. Currently, it has closed below the short-term moving average of 20 DMA but just above the 50 DMA. Interestingly, the Nifty retraced more than 50 per cent of the historical surge of 1,000 points. It fell 568 points from the high of 11,695 made on October 23. It also closed below the swing highs of August 9 and 27. Importantly, it tested the consolidation breakout level. At the same time, Nifty fell below this breakout level or the 11,140-181 zone and entered into a consolidation zone again. This means that the euphoria of the corporate tax cut has faded out. 

The leading sectoral index, Nifty Bank, actually corrected more than 78 per cent of 4,074 points move in two days. It also closed below the all short and long moving averages. The PSU Bank index is actually making a new 52-week low closing. The PVT Bank index has given up 80 per cent of the gains. The small-cap index has given up 100 per cent of the gains. And there are many stocks trading below the lows of September 20. With this kind of retracemens, there are very bleak chances of a bullish reversal from here. Any bounce above the 11,470-570 zone can be treated as a bullish reversal. 

As discussed in the last column, the failure break above the confluence of channels is not a good sign for the market. Even the indicators are suggesting more weakness in the market in the near future. The leading indicator RSI once again reached below the 50 zone. The MACD line is about to cross under the signal line and the histogram is near zero. The Stochastic oscillator also indicates a further downward move. Now the big question is whether the 50 DMA level of 11,088 and

61.8 retracement of the level of the recent upsurge at 11,061 will hold or not. In any case, if Nifty falls below the 11,060 level, the next level support is placed at 10,890. Below this, all the way it will test the prior lows. 

On the upside, the resistances are placed at 11,250, 11,335, 11,400 and 11,470. Only by moving above these levels will the bulls get confidence to move upside. Watch these levels for the next few days. The sharp pullbacks can only improve the bullish sentiment. The continuous negative closing days are now six. As history suggests, most of the downswings ended on the 7th or 8th day. Let’s wait and watch whether history will be repeated or not. Watch the Nifty movements. This week’s close is important as three Nifty stocks, namely, TCS, Infosys and Indusind Bank are declaring their Q2 financial results. The RBI monetary policy did not cheer the market once again. In fact, all the monetary policy decisions have witnessed market sell-offs. 

The earnings season is set to begin this week. We need to watch closely how many corporates benefit from the recent corporate tax cut. The measure of impact is very important for this season. It is also important to watch the topline growth to measure the slowdown effect and the bottomline to check if there is any improvement with the corporate tax cut. The financial performance of the Nifty companies is very crucial for the market movement. All the other economic data points are not encouraging. At least the financial results may turn out to be a sentiment-booster in the market. Next week onwards, stock-specific market action will rule the market.


BLUE STAR ............................ BUY ............................ CMP Rs.806.10

BSE Code : 500067 Target 1 .... Rs.875 | Target 2 ..... Rs.905 | Stoploss....Rs.751 (CLS)

Blue Star, India’s leading air-conditioning and commercial refrigeration company has had its base in the country prior to independence. It offers end-to-end solutions as well as is engaged in manufacturing, contracting and providing after-sales service to its customers. It has also forayed into the residential water purifier business. Technically, after the 53-week cup and handle, the stock consolidated for 14 weeks. Currently, it has formed a pennant pattern on a daily chart and near to the pivot level. It has also moved above the 40, 30 and 10 weekly averages. The 20-period RSI took support at 50 and moved upside into the bullish zone with 60.42 to form higher highs and higher lows. The MACD line is above the signal line and zero line. The MACD histogram is in greed territory, indicating continuing upside momentum. The -DI is below +DI and ADX and ADX turning upside at 21.58 show the strength of the trend. The stock also meets all the CANSLIM characters. With its relative price strength (RS) at 91 and EPS rank at 87 with good buyers’ demand and good group rank (10), the stock meets all the CANSLIM characters. Its return on equity is healthy at 22 per cent. The number of funds investing in this stock has increased to 129. Buy this stock at Rs.806.10 with a stop loss of Rs.751. The targets are open to Rs.875 and then Rs.905.

WHIRLPOOL OF INDIA .............. BUY ........................... CMP Rs.1996.30

BSE Code : 500238 Target 1 ..... Rs.2160 | Target 2 ..... Rs.2240 | Stoploss....Rs.1850 (CLS)

India’s leading home appliances company, Whirlpool of India manufactures and markets refrigerators, washing machines, air-conditioners and microwaves. The company has three manufacturing units in Faridabad, Pondicherry and Pune. Its major revenue share is derived from refrigerators. The revenue from this vertical is about 57 per cent. It has posted consistent double-digit growth of sales and EPS for the last three quarters. Technically, the stock closed at lifetime highs by clearing its earlier pivot level. It has broken out of 50-week consolidation with above average volumes. As it makes a new lifetime high, the stock is trading all short and long-term moving averages. It is also meeting Minervini’s trend set-up rules. The 40, 30 and 10 weekly moving averages are trending up. The RSI is bullish with 72.44 on the weekly chart. The MACD line is almost at lifetime highs and the histogram is showing bullish momentum. The ADX is above the -DI and +DI is above the ADX. This shows that the trend is strengthening further. The stock also meets all the CANSLIM characters. It relative price strength (RS) is as high as 95 and EPS strength is at 90. The buyers demand is at a greater level of A- with a good group rank of 30 and master core of B. The return on equity (ROE) is at 19 per cent. It also meets 93 per cent of Warren Buffet’s buy rules. Buy this stock at Rs.1,996.30 with a stop loss of Rs.1,850. The target is open at Rs.2,160, followed by Rs.2,240.

(Closing price as of Oct 07, 2019)

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