Nifty Index Chart Analysis

The Indian market began the week on a negative bias but took a U-turn midway and signed off the calendar year 2016 on a prosperous note, with Index Nifty surging over 200 points or 2.51 per cent and Sensex closing at 26,626.40 with a gain of over 550 points or 2.25 per cent. On the sectoral front, FMCG and Information Technology stocks were in the limelight in the last week of 2016. In the week gone by, India signed a pact with Singapore to amend a decade-old treaty to begin taxing capital gains on investment routed through the South-east Asian nation from April, 2017 to check round-tripping of funds.

Technically, Nifty took support around its major support level of 7,900 which also happens to be 50 per cent retracement level of major upswing from the levels of 6825.80 to 8968.70 and on the weekly time frame chart Nifty formed a ‘Bullish Engulfing’ candlestick pattern. This candlestick pattern is a bullish reversal pattern, usually occurring at the bottom of a downtrend. Now, going forward, the major resistance for Nifty is placed in the zone of 8290-8330. Once Nifty closes above this resistance zone, then traders could expect reversal in the trend and a confirmation of short-medium term bottom at the level of 7900. Nifty is likely to test the level of 8460 if it closes above the level of 8330 on weekly basis.

On the flip side, the zone of 8000-7970 will act as a decent support below which the next support is placed around the level of 7,900. On the daily chart, Nifty took support around the level of 7,893, along with marking a positive divergence on the RSI. Additionally, on the daily time frame, Nifty is making 'higher top, higher bottom' formation with decent volumes after taking support around the level of 7893. Now, going forward, the level of 8290-8280 is a stiff resistance for Nifty and the recent swing high level formed on December 9, 2016 around the level of 8274.95. Nifty needs to sustain above this zone for a fresh wave of upmove.

However, if it fails to clear this resistance zone then this rally could be termed as a relief rally or a pull-back rally. The daily 14-period RSI after marking a positive divergence is moving higher and at present, quoting around the level of 54 as on December 30, 2016. Going forward, if it moves above the level of 60, one may expect extension of the current upmove. The level of 7,900 once again proved to be saviour for the Nifty. Now, the key resistance zone is placed around levels of 8280-8290 if Nifty trades above 8280-8290 levels then traders could expect reversal in the trend and a confirmation of short-medium term bottom at the level of 7,900. On the other hand, if Nifty fails to cross this roadblock, then this rally could be termed as a pullback rally.

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The stock of Delta Corp is currently trading at Rs.117. Its 52-week high and low stands at Rs.195.30 and Rs.49.15, respectively, made as on October 26, 2016 and February 29, 2016. The stock formed a ‘Pin Bar’ around its 52-week high levels and thereafter witnessed a sharp correction in the prices. However, as on weekend December 30, 2016 the stock formed a ‘Bullish Engulfing’ candlestick pattern on the weekly time frame. This candlestick pattern is a bullish reversal pattern usually occurring at the bottom of a downtrend. Along with the bullish engulfing candlestick pattern there was a decent up-tick in the volumes, which is positive for the stock. Considering the above analysis, we expect a decent bounce in the stock and, therefore, we advise traders to initiate a long position in this stock at Rs.113-117 with a price target of Rs.128-137 and a strict stop loss to be maintained at the level of Rs.103. 

The stock of Chambal Fertilisers and Chemical is currently trading at Rs.78.45. Its 52-week high and low stands at Rs.80 and Rs.50.65, respectively made on January 4, 2017 and February 12, 2016. Since February 2015, the stock of Chambal Fertilisers and Chemicals has been trading in a wide range. Recently, in the month of December 2016, the stock witnessed breakout of this range on the weekly chart with a long bullish candle along with rise in the volumes. Post the breakout, the stock registered high of Rs.74.50 and thereafter witnessed a minor correction. This correction provides a decent opportunity for short term traders to enter the stock around Rs.75-78 for a target price of Rs.88-94. The stop loss for the trade would be around the level of Rs.69.