Nifty Index Chart Analysis

At the start of the week Indian markets reacted to RBI’s surprise move ordering banks to transfer 100 per cent of their cash under the central bank’s cash reserve ratio (CRR) from deposits generated between September 16 and November 11. However, a good bounce back was witnessed as selling pressure was absorbed and the market re-conquered its psychological mark.

The enthusiasm petered out the very next day as GDP data for Quarter 2 came in at 7.3 per cent below the consensus of 7.5 per cent. The Manufacturing PMI at 52.3 was sharply lower than the October figure. Technically, Nifty on the weekly time frame chart has formed a ‘Gravestone Doji’ as against ‘Hammer Candlestick' pattern as on November 25, 2016. The Gravestone Doji is created when the open, low, and close are near about the same price, and the long upper shadow indicates that the market has witnessed selling at higher levels. On the daily chart Nifty failed to sustain above its 21-DEMA as on December 1, 2016 and formed a ‘Dark Cloud Cover’ Candlestick pattern.At present, Nifty is trading around levels of 8128 as on December 5, 2016.

The opening downside gap of December 2, 2016 is still intact and unfilled, and the immediate resistance for the gap stands at 8160-8185 levels. Hence, now going forward the zone of 8185-8230 is likely to act as a stiff resistance level. A close above this resistance zone will open up for up-move upto levels of 8330. On the downside, the zone of 7900-7930 is a crucial support zone for the Nifty index. The zone of 7900-7930 is a crucial support zone for two reasons. Firstly, the Brexit low was around 7927, andthereafter, Nifty made a fresh swing high; and secondly in the recwent correction Nifty bounced from the zone of 7916, eventually trading comfortably above its psychological mark of 8100.

The medium term trend for the Nifty index looks range bound with the level of 7900 as a strong support on the lower side; and on the upside 8185/8230 is a strong resistance zone.

STOCK RECOMMENDATIONS

The stock of Shemaroo Entertainment Ltd., is currently trading at Rs.385. Its 52 week high/low stands at Rs.422/ Rs.222, made on December 01, 2016 and February 29, 2016. The stock recently formed “Double Bottom” pattern around the technical level of Rs.300 in its 1-year daily chart. Thereafter the stock witnessed bullish breakout to break the level of Rs.320 and Rs.333, which are 200-day EMA level and 100-day EMA level respectively. In the last week of October 2016, the stock also formed 'Inverted Head & Shoulder' pattern which is indicative of a medium-long term positive momentum. Taking into consideration all the parameters, it is anticipated that the scrip may continue to see its northward journey to make a new 52-week high. Weighing all the possibilities we recommend BUYat Rs.385 level with a target of Rs.420 followed by Rs.435 and a stop loss of Rs.360. 

The stock of Kalyani Steels is currently trading at Rs.293. Its 52 week high and low stands at Rs.412/ Rs.121 made on August 22, 2016 and February 12, 2016. Looking at the 1-year daily chart from the second week of November 2016, the stock witnessed a long sharp decline and a fast reversal. The stock formed 'V' pattern with the reversal point of Rs.253 which is 200-day EMA level. In the current momentum, the stock has seen some consolidation in the small range, while it’s sustaining above 100-EMA at Rs.289. Moreover, the momentum oscillator RSI is quoting at 61-62 indicating strength in the stock. Considering all the factors as discussed above, we believe the scrip may take vital supports at lower levels. We recommend BUY in Kalyani Steels in the range of Rs.293 to Rs.300 levels with a target of Rs.330 and Rs.340 and a stop loss of Rs.270.