NIFTY Index Chart Analysis

The equity benchmark indices have reached a critical junction. The Nifty on an intra-week basis slipped below the 10-week average for the first time since April of this year. Most importantly, for the first time after February 2022, the Nifty registered a fourth successive weekly negative closing. On a weekly basis, the index has formed a long upper shadow candle and a bearish candle. The fall may be smaller compared to previous declines. This indicates the market sentiment clearly and loudly.[EasyDNNnews:PaidContentStart]

Currently, the Nifty is oscillating around the 50 DMA and around the 19,300 level, which is a crucial support. The fresh week began with a bullish candle after a doji candle. By closing above last Friday’s high, the indication is that consolidation is on the cards. Interestingly, the declining or advancing days have been limited to 2-3 days for the past two months. Monday’s bounce is part of the rhythmic price movement. The bounce with the lowest volume after July 26 is raising doubts about sustenance.

As discussed in an earlier column, a decline must continue for over three days for a strong bearish bias. The Nifty is holding five distribution days currently and trading around 50 DMA. A decisive decline below 50 DMA (19,318) and below 19,253, which is the previous week’sdecline and the downside probabilities have increased.

The volatility index, India VIX, has been sustained at the lower range for the last few weeks. It is also at a similar level in the zone of 10-13. We have been cautioning about the dangers of a low VIX regime. It hit 10.14 on July 28, which is the lowest after 2009 and 2020. Before the March 2020 sharp decline, the VIX traded between 9.16 and 17.93. The current range of 10.14 - 13.74 is much lower than the previous range. This lower range of VIX indicates that either the market participants are at the height of complacency or it is a sign of calmness before a storm.

A low VIX level indicates potential reversal or correction in the market as thevolatility tends to revert to its mean level. It gives enough time to book profits. The weekly MACD is about to give a bearish signal and the RSI is near the neutral zone. The daily MACD line was hanging on the zero line. The daily RSI declined below the support level of 45 and got confirmation for its hidden negative divergence. If the RSI closes below 40, expect more downside in the near term.

The Nifty declined by 738 points or 3.69 per cent from its recent lifetime high of 19,992. The decline is not impulsive in nature, once again giving enough time to book profits. The metal, pharmaceutical, media, and PSU banks gained momentum as well as relative strength in the leading quadrant. The realty index is losing momentum in the leading quadrant. Bank Nifty and Fin Nifty remain in the lagging quadrant.

The FMCG index has just entered the weakening quadrant. Though the IT index has gained some momentum, it has entered into an improving quadrant. The automotive and consumer durable sectors have lost momentum and moved into the weakening quadrant. This relative rotation data shows some improvement in sector rotation. Focus on pharmaceutical, metal and PSU banks’ sectors. Stock-specific activity will be seen in the IT sector. The Nifty will likely consolidate within the range for the coming week. On the upside, the index may test the 20 DMA placed at 19,572. On other hand, a decisive close below the level of 19,300 with higher volume means the correction will continue. We may see more volatility in range-bound trading and stock-specific activity will continue. It is important to keep the position size small and cut down the leveraged trades. Stay cautious with neutral to negative bias.

STOCK RECOMMENDATIONS

KPI GREEN ENERGY ....................... BUY ........................... CMP ₹873.85
BSE Code : 542323
Target 1 .... ₹1120 
Target 2 ..... ₹1175 
Stoploss....₹788 (CLS)

KPI Green Energy provides solar power as an independent power producer (IPP) and Engineering, Procurement, and Construction (EPC) services to Captive Power producers(CPP) customers. The company has a plant in Bharuch, and all the operations are conducted from here. It has a cumulative capacity of 339 MW till Q1 FY24. It aims to have 1000 MW capacity by 2025 and has owned or leased 1508 acres of land. It has orders for 144 MW, including 38MW of IPP, 66MW of CPP, and over 40MW of Hybrid CPP and 384 MW of business is in the pipeline. Technically, the stock is trading at the prior pivot. It has been consolidating for the past seven weeks, forming a flat base. The Price Relative Strength line is at a new high (92), indicating the outperformance compared to the broader market. The stock is well placed above all key moving averages. It is 6.23 per cent above the 50DMA and 58.19 per cent above the 200DMA. The Weekly RSI is in a strong bullish zone and has been consolidating for the past week. The MACD line is above the signal line. Due to this consolidation, the histogram declined. As it is trading at the pivot level, it cleared all the resistances. The Elder impulse system has formed neutral bars during the consolidation and is well above the Ichimoku cloud. The KST and the TSI indicators have been in the bullish set-up. In short, the stock forms a flat base. Buy this stock in the ₹860-900 zone. Maintain a stop loss at ₹788. The short-medium-term target is ₹1120- 1175.

MOLD-TEK TECHNOLOGIES ..................... BUY .................. CMP ₹367.55
BSE Code : 526263
Target 1 ..... ₹412 
Target 2 .... ₹434 
Stoploss....₹320 (CLS)

Mold-Tek Technologies is a leading engineering and technology solution company specialising in providing Civil and Mechanical engineering services. It is engaged in detailing structural steel, BIM services, design and pre-engineered metal building. About 88 per cent of the revenue comes from Structural business engineering services. Last year, the company started booking larger projects in BIW space, and as of today, the work on hand stands at USD 1.10 million as against USD 0.20 million, a growth of 450 per cent. Technically, the stock has broken out of an 11-week cup pattern with above-average volume. On a daily chart, it has broken out of a cup and handle pattern. The price Relative Strength line is at 94, a new high that indicates outperformance compared to the broader market. As the stock is trading at a new lifetime high, it cleared all resistances. It is trading 26.24 per above the 50DMA and 58.41 per cent above the 200DMA. The moving average ribbon is in an uptrend and meeting all uptrend set-up rules. The weekly MACD has given a fresh buy signal and indicates an improved bullish momentum and is above the Anchored VWAP resistance and monthly VWAP. The stock is well above the Ichimoku cloud while the Elder impulse system has formed a strong bullish bar. The KST and the TSI indicators have been in a strong bullish set-up. In short, the stock has broken the bullish pattern with higher volume. Buy this stock in the ₹355-370 zone, and maintain a stop loss at ₹320. The short-medium target is ₹412-434.

(Closing price as of August 22, 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.  

[EasyDNNnews:PaidContentEnd] [EasyDNNnews:UnPaidContentStart]

[EasyDNNnews:UnPaidContentEnd]