NIFTY Index Chart Analysis

The NSE benchmark Nifty 50 is still directionless though it made a futile effort to break the budget day range. On the monthly chart, Nifty is forming a doji candle and on the weekly chart it is forming a bearish engulfing candle. As mentioned earlier, the monthly bearish engulfing candles do not have a good history. Most of the tops were formed with bearish engulfing. After getting a confirmation for bearish engulfing last month, currently it has formed a lower low and lower high candle. After an unsuccessful effort last week, it failed to close above the 20-week average. [EasyDNNnews:PaidContentStart]

Now, it has declined below the 10-week average. Nifty formed a long-legged small body candle on the weekly chart. Even though the index has formed a higher low and higher high candle, bullish strength has not emerged. In fact, the benchmark index has been directionless for the past two months as it is trading in a broader range. After forming a back-to-back bullish candle, Nifty failed to continue the momentum. Last Thursday, it was unsuccessful in holding the opening gains and formed a bear candle. As discussed earlier, the zone of 18,100-18,265 acted as strong resistance last week.

The efforts of crossing 50 DMA also failed on Thursday. On the daily chart, the index has formed a rising wedge kind of pattern and closed below the crucial support. A decisive close below 20 DMA (17,824) will lead to a downside move in an impulsive way. As long as it trades below the 18,030-18,265 zone of resistance, the upside potential is limited. The 20-period double exponential average is at 17,826. On Tuesday, Nifty closed on this support. Below this, the immediate supports are at 17,744 and 17,651. The index may consolidate in this range for a while before taking further direction.

There is no hope of breaking the budget day range this month. The weekly RSI is just above 50 and the daily RSI is declining below 50 and in a neutral zone. There is no divergence visible now. The daily MACD is still below the zero line and the weekly MACD is declining and showing no improvement in bullish momentum. Incidentally, the weekly and daily ADX, which is the trend strength indicator, is also declining. The JDK RS momentum line is also declining and on the 100 line, which shows a lack of momentum. The volatility index, India VIX, remains near a historically lower level. 

Generally, low VIX indicates the complacency of traders. Longer the complacency, higher is the probability of an impulsive move. A reasonable spike in VIX will cause the market to decline. Last Thursday, Nifty faced resistance at a 50 per cent retracement level of the December 1, 2022 to February 1, 2023 decline. The counter-trend rallies normally end at the 50-62 per cent retracement level. That’s the reason Thursday’s high is crucial for the bulls. Any further up move will be possible only if Nifty closes above 18,134 convincingly. For the last four days, Nifty IT index has been trying to break out of a Stage 1 base, which is in an ascending triangle pattern. Nifty Auto and Nifty FMCG are in the leading quadrant.

Some select stocks in these sectors may outperform the broader market. The broader market indices, Nifty Mid-Cap 100 and Small-Cap 100, are still trading in the budget day range. Both indices are sustaining below the 10 and 20 weekly averages. Nifty 500 is also in the budget day range. As long as these broader indices show underperformance, the benchmark may not be in a comfortable position. At the same time, the market breadth is not improving. Nifty may trade on a flat note over the next one week to 10 days. As said above, any spike in VIX will cause the market to fall. We may only be able to get good directional trading opportunities if there is a decisive break-out of the range.
 

STOCK RECOMMENDATIONS

BOSCH LTD. ................. BUY ................ CMP ₹18,469.90

BSE Code : 500530
Target 1 .... ₹19,250 
Target 2 ..... ₹20,000 
Stoploss....₹17,500 (CLS)

Bosch Ltd. is one of India’s largest automotive ancillary component manufacturer primarily engaged in the production of diesel and gasoline fuel injection systems, starters and motors, industrial technology and special purpose items. One of the oldest companies of this sector, Bosch offers various engineering solutions to its vast networks of clients. Technically, the stock has registered a breakout from its symmetrical triangle pattern on the weekly timeframe. The breakout was accompanied by sharp rise in volumes. Interestingly, the stock has traded above all its key short-term and long-term moving averages and thus indicates bullishness across all timeframes. It is currently about 5 per cent above its 20 DMA level. It meets Daryl Guppy’s GMMA criteria. The consecutive bullish bars by the Elder Impulse System also indicate strong momentum in the stock. The leading indicator 14-period daily RSI (72.85) lies in the super bullish zone and shows strong strength in the stock. The relative strength is above zero and thus demonstrates outperformance against the broader market. Also, the trend indicator ADX (17.70) is in a rising mode and shows strong trend strength. The OBV is at its peak and demonstrates strong buying activity. The +DMI is well above -DMI. Overall, the technical setup is a perfect blend of positive price action and bullish technical parameters. Considering the above technical points, the stock is expected to test the level of ₹19,250, followed by ₹20,000 in the medium term. One can maintain stop loss at the level of ₹17,500. The company has consistently maintained its upward performance curve, as is reflected through its technical parameters.
 

GODREJ PROPERTIES LTD. ................... SELL ................ CMP ₹1,143.40

BSE Code : 533150
Target 1 ..... ₹1,020 
Target 2 .... ₹950 
Stoploss....₹1,218(CLS)

Founded in 1897, the Godrej Group was established to demonstrate meaningful infrastructure and building businesses that serve the country’s interests. The Godrej Group comprises a varied business portfolio that includes real estate development, fast moving consumer goods, advanced engineering, home appliances, furniture, security and agricultural care products. On the weekly technical chart, the stock has registered a breakdown from its descending triangle pattern backed by above average volume. It has formed a sequence of lower high and lower lows, and has shredded over 50 per cent from its all-time high level of ₹2,598. Technical analysis shows that the stock has all the bearish implications. It has been trading below all the key moving averages and has plunged about 13 per cent from its 200 DMA and about 5 per cent from its 20 DMA. The breakdown confirms its medium-term bearishness. The Elder Impulse System indicates a ‘sell’ signal. The 14-period daily RSI (33.05) has slipped in the bearish territory and shows strong weakness. Recently, the MACD has indicated a bearish crossover. The OBV is falling and shows muted trading activity. The Relative Strength is poor against the broader market. The -DMI has slipped below the +DMI and shows bearish trend. The four consecutive bearish bars have negative implications and show no sign of reversal whatsoever. Overall, the bearish setup means a shorting opportunity. The stock is expected to test the level of ₹1,020, followed by ₹950. Meanwhile, stop loss can be placed at prior swing high level of ₹1,218. 

(Closing price as of Feb, 21, 2023)

*LEGEND: ■ EMA - Exponential Moving Average. ■ MACD - Moving Average Convergence Divergence ■ RMI - Relative Momentum Index ■ ROC - Rate of Change ■ RSI - Relative Strength Index 

Disclaimer: Above recommendations are based on various technical parameters and any fundamental input has not been considered for the recommendations. Follow strict stop loss for the recommendation. 

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