Nifty Index Chart Analysis

The Indian markets took traders and investors for an exciting ride in the year 2015, but as the year kept approaching its, we witnessed a trip to nowhere as the markets ended the year with losses of 5 per cent.  This has been the weakest performance delivered by the Indian markets since 2011. However, the broader market was in the seventh heaven as numerous stocks had given a multi-fold returns in the calendar year 2015. This contrary trend highlights the importance of selecting a right stock which has a viable business model to garner superior returns in the equity markets.

The market flagged off the year 2016 on an optimistic note, with the Nifty index closing at 7963 with a gain of 1.30 per cent on the weekly basis. Both the Sensex and Nifty reclaimed their psychological levels of 26,000 and 7,900 respectively.

As it is seen in the Nifty weekly chart, the index has managed to hold on to it’s triple bottom pattern which was formed around 7539 level. On the weekly time frame chart, the index has formed a ‘Three Advancing White Soldiers’ pattern. This pattern consists of three bullish candlestick pattern and it acts as a potential trend reversal pattern. Currently, the index is trading above its 23.6 per cent retracement level of the down move from the lifetime high level of 9119 to 7539. The momentum oscillator RSI after forming a positive divergence at the recent swing low of 7551 has been rising upwards and the 14 week RSI has given a positive cross over the 9-week EMA signal line. 

Now going forward, the index is likely to continue its upward momentum and the upside level of 8055 will act as an immediate resistance for the index and a level of 8180-8200 is considered to be the major supply zone. Any close above this supply zone will help bulls to gain further momentum and this could lead to a rally up to the levels of 8600-8650. The level of 7860 will act as an immediate support and major support is seen around the level of 7700 and a breach of this region could lead to further unwinding by the bulls and this could lead to further correction up to the levels of 7640-7550.

As can be seen in the Nifty daily chart, the index has managed to hold on to its double bottom around levels of 7539-7550 and has seen a good trending move on the upside. The index has continued its sequence of top higher bottom pattern after registering a low of 7551. Now the index is trading above its 50 per cent retracement level of the down move from the levels of 8336 to 7551. Now going forward, the index needs to further scale above 8000 mark to show further signs of bullishness. If it does manage to cross its hurdle of 8000 then it’s likely to test the levels of 8100 and 8160 in the short term. On the downside, immediate support for the index is placed around 7850 and next major support is around 7730.

Currently the index is trading below its important medium-long term moving average i.e. 100-day EMA (7986) and 200-day EMA (8067). This suggests that trend for the medium-long term on the daily chart is in the favour of the bear’s.  However, one positive takeaway is that the index is trading above its important short-term moving average i.e. 21-day EMA (7854) and 50-day EMA (7891); this indicates that the short term trend is bullish. 

The daily 14-day RSI is quoting around 59 levels and it is trading near its higher end of the range. Now going forward if it manages to sustain above level of 60-65 zone, it will be the first indication a good rally in the coming trading session for the index. On the other hand if RSI fails to cross this zone and stays below 60 levels, the momentum on the upside would be muted.  

Conclusions (After putting all the studies together)

-          The current trend is in favour of the bulls as index has managed to sustain above its important short term moving average i.e. 21-day EMA and 50-day EMA on the daily chart.

-          The intermediate trend is sideways and index is likely to trade in the narrow range of 7700 and 8100.

-          The long term trend is down as index has been forming lower top and lower bottom pattern on the weekly chart and it has been trading below its 200 day EMA on the daily chart.
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Stock Recommendation:

Buy UPL:

The stock is currently trading at Rs 440. Its 52-week high/low stand at Rs 576.40/ Rs 315.30 and were made as on 11^th August, 2015 and 07^th January, 2015, respectively. On the weekly timeframe chart, the stock has retreated after taking support around its important support range of Rs 385-397. Stock has also formed a Bullish Tweezer Bottom pattern; this pattern occurs during a downtrend when bears continue to take prices lower, usually closing the day near the low and on day two it is completely opposite the second candle eliminating all the losses from the previous day. On the daily time frame chart, the stock is trading above its important short and medium term moving averages i.e. 21 day EMA (Rs 430) and 50 day EMA (Rs 439.5), 100 day EMA (Rs 38.70) indicating bullishness in the stock for short and medium time frame. The 14-day RSI is quoting at 55 levels and is rising higher which is a bullish signal.  Hence, we suggest to initiate a long position in this stock with stop loss of Rs 412 on the closing basis with a target price of Rs 460-475 in the short-medium term.

The stock is currently trading at Rs 19,199. Its 52-week high/low stands at Rs 27,990/ Rs 17,873.05 were made as on 20^th March, 2015 and 22^th December, 2015. Stock after registering its 52 week in the month of March has seen a sharp decline in the prices. Currently, the stock on the daily time frame has reversed after taking a support around levels of Rs 17,700-17,900. On the daily time frame stock has managed to close above its downward sloping trend line which indicates a trend reversal. On the weekly time frame stock has formed a Bullish Marazbuzo and this suggests a very bullish scenario for the stock. Positive divergence has been observed in the RSI which confirms reversal of the trend. Considering this we recommended to buying this stock in the range of Rs 18800-19000 for price target of Rs 20800-22500 with stop loss of Rs 17700 on closing basis.