NIFTY Index Chart Analysis

The domestic equity markets have rallied for the third straight week. In the process, Nifty has erased five weeks of losses in just three weeks, which is just 60 per cent of the time (near Fibonacci number 61.8 per cent). The price pattern looks like an eight-week cup pattern breakout. The previous week’s Bull Flag pattern breakout has met one-third of the target. As mentioned earlier, the most positive aspect of this rally is higher volume, which shows the trustworthiness of the breakouts. As the index is in uncharted territory, it has cleared all its resistance. [EasyDNNnews:PaidContentStart]

The 11-day rally is impulsive in nature and looks overstretched. The higher degree rally is generally not sustained for a longer period. Barring last Tuesday (September 12), Nifty rallied for all the 10 days. There are very few instances historically where the rally has sustained for more than 8-9 days in any swing. Because of this reason, it is time to be very cautious, although undercurrents remain strong. For three consecutive sessions, Nifty closed above the important psychological level of 20,000. When optimism is at an extreme level, expect the unexpected. 

For now, the immediate resistance is at the level of 20,432, which is a 38.2 per cent extension level of the Bull Flag. On a weekly chart, the index looks very strong as it has just registered a cup breakout, which has a depth of 3.8 per cent. Post breakout, Nifty gained 1 per cent. This means there is at least another 2.8 per cent rally due in the short term. In a normally bullish case scenario, this target can be achieved 60 per cent of the time, i.e. in about six weeks’ time. Before this, there must be a small pullback or retracement.

Nifty is currently trading 2.97 per cent above the 20 DMA. The Bollinger bands have expanded to the maximum. The difference between the upper and lower bands is more than 6 per cent, which is unusual. The chances of moving further high are limited. Even if it gets extended, we can only forecast up to the level of 20,432. In these conditions, it is tricky to navigate the market. There is a higher probability of counter-trend consolidation or a pullback from the current levels. In such a case, Nifty can re-test the breakout level, which stands at around the level of 19,986.

Below this level, the next level of support is seen at 19,840, which is 38.2 per cent retracement level. Normally, the countertrend consolidations end at 38.2 retracement levels. So, if the minor correction is a reality, expect Nifty to test the level of 19,840, which is desired for a healthy uptrend. The exuberant rally in the Mid-Cap and Small-Cap indices has stalled for the moment. In fact, this universe has been outperformed since the bottom of March 2020. On September 12, a sharp sell-off triggered havoc in the market. 

It is high time to avoid taking fresh positions in this space. Expect a reasonable correction by at least 7-8 per cent in these two broader market indices. The low-float small-cap stocks may see troubled times. The sector rotations are going on perfectly well in the market. Nifty IT is gaining momentum in the improving quadrant. Be positive on this sector as it has also broken out of a 60-week Stage 1 base. It is going to be a leading sector in the short term. Even though the metal, pharmaceutical and PSU bank indices are in the leading quadrant, they are losing their momentum. 

All the other sectoral indices have losing momentum and relative strength as well. The historically low VIX regime is still a concern for the market. Particularly when the market is at a new lifetime high as it has been in the past few months. This may lead to an unexpected storm in the market. The timing may not be known, but we may get some cautionary signals just before the storm. Overall, the market would continue to be highly stock-specific. Focus on protecting profit and capital while prudent money management is called for in such times.

STOCK RECOMMENDATIONS

TRIVENI TURBINE LTD. ............... BUY .................. CMP ₹432.20

BSE Code : 533655
Target 1 .... ₹494 
Target 2 ..... ₹510 
Stoploss....₹384 (CLS)

Triveni Turbine is engaged in providing industrial heat and power solutions and decentralised steam-based renewable turbines up to 100 MW in size. The company is a dominant Indian and global player and delivers robust, reliable and efficient end-to-end solutions. With its manufacturing facility in Bengaluru, the company has installed over 6,000 steam turbines across industries. It has a presence in 75 countries and provides renewable power solutions specifically for biomass and independent power producers along with process co-generation and waste-toenergy, waste heat recovery and district heating. The company also provides a wide range of aftermarket services to its own fleet of turbines. Technically, the stock has broken out of a 12-week double bottom pattern of Stage 2. It registered high volume and validated the breakouts. Its price relative strength line is fairly good at 74 and rising. It closed at a new lifetime high and cleared all resistances. All long-term moving averages are in an uptrend. It is trading 9.6 per cent above the 50 DMA and 25.55 per cent above the 200 DMA. The Bollinger band’s squeeze indicates an impulsive move in the short term. The weekly MACD is about to give a bullish signal. The RSI has moved into a strong and bullish zone. The Elder’s impulse system has formed a strong bullish bar. The stock has entered into the leading quadrants as its momentum and relative strength lines are above the zero line, compared to the broader market index Nifty 500. In short, the stock has registered the second base of Stage 2. Buy this stock in the zone of ₹421-435. Maintain a stop loss at ₹384. The short-term to medium-term target is ₹494-510.
 

BALRAMPUR CHINI MILLS LTD. .............. BUY ................ CMP ₹439.25

BSE Code : 500038
Target 1 ..... ₹495 
Target 2 .... ₹530 
Stoploss....₹395 (CLS)

Balrampur Chini Mills (BCML) is one of the largest sugar producers in India. Its operations are forward integrated for manufacturing ethanol, using molasses as a by-product of sugar, and power using cogeneration from bagasse generated out of sugar manufacturing. The company has 10 sugar mills in UP with a combined capacity of 77,500 tonnes per day (TPD) of sugarcane, 1,050 KLPD of distillery and 175.7 MW of saleable cogeneration capacity. The stock has broken out of a 20-week Stage 1 consolidation. For the last two weeks, the volumes were above average, showing buying interest in the stock. Its price relative strength is improving above the prior high. The stock is above the long-term averages. It is 11.26 per cent above the 50 DMA and 13.09 per cent above the 200 DMA. Currently, it is at its 52-week high. It is in the leading quadrant on RRG charts as its relative strength and momentum are above the zero line. The weekly RSI is in a strong bullish zone. The MACD is showing strong bullish momentum. The Elder’s impulse system has formed a strong bullish bar. The stock has also cleared the Anchored VWAP resistance. The KST and TSI indicators have been in a strong, bullish setup. In short, the stock has recently broken out of a base and is trading around 2 per cent from the pivot point, which is the ideal buying range for this stock. Buy this stock in the zone of ₹434-450. Maintain a stop loss at ₹395. The short-term to medium-term target is ₹495- 530 

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

(Closing price as of September 18, 2023)

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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