NIFTY Index Chart Analysis

The January phobia went into a repetition mode as it closed below the open in the first week itself. And the second week started with a significant decline. The year 2024 has begun with a new high and a bearish candle – a Gravestone Doji – followed by a sizeable bearish candle. The benchmark index declined 1.56 per cent in the first six trading sessions.[EasyDNNnews:PaidContentStart]

Interestingly, at the end of the week, the index has formed a Doji candle in both the weekly and daily timeframes. It also closed negative on a weekly basis. The historical fact is that the index has closed above the opening level only seven times in the last 20 years. Over the previous six years, it has never closed above the open. If this history is repeated, the highest probability of closing below the level of 21,727 will be higher by the end of the month. We can assume that the market has turned weaker with the index forming more bearish bars and indecisive candles in the first six days. 

It recorded above-average volumes and registered two consecutive distribution days. For a strong confirmation, the Nifty needs to close below the weekly Doji candle which stands at a level of 21,500. A close below the 21,500 mark would open up for further correction over the next 2-3 weeks. During the first week, the index recorded above-average volume and higher than the previous week. The higher volume on a negative is a sign of distribution on a weekly basis. The Nifty is holding four distribution days currently. If they increase to more than six it will imply that the market is entering into a decisive counter-trend consolidation. A swing requires at least 5-8 negative days with higher volume for the bear’s domination.

For a minor swing, it must decisively close below 21,500, and for an intermediate low, a close below 20,976, as of the low of December 21, is necessary. The Nifty has met 80 per cent of the 88-week, Stage 1 consolidation target in 30 weeks. It also broke the channels drawn from the June 2022 low and March 2023 low. With the fall of Monday, January 8, the second channel registered a failed breakout, as it closed in the channel again. If it registers the first channel’s failed breakout by closing below 21,200, it will result in the testing of the 20,200 level by the end of March. 

This is nothing but testing of the 50 per cent (20,336) and 61.8 per cent (19,982) retracement levels of the current upswing. We had projected a correction in the January-March quarter in our earlier column. As stated earlier, this correction is healthy, and a bounce from the end of this correction will again be impulsive till the 2025 first quarter. The current market condition looks like an overextended rally. The weekly Bollinger bands’ expansion suggests the same. The RSI is near the extreme zone and above the prior highs. 

The daily RSI developed a negative divergence and got confirmation of its bearish implications. The 20 DMA’s support of 21,403 is very near now. A close below this will lead to a test of an intermediate low of 20,976. On the upside, if the Nifty closes above 21,834, it may test the level of 22,232 sooner or later. But, if the corrective consolidation is a reality, expect a lower low at 20,976 and a lower high at around 21,500. This counter-trend corrective consolidation will be entirely volatile, and the stop losses will often trigger. 

For the next two weeks, the metal, oil and gas sector indices may outperform compared to the Nifty 500. The FMCG is in the lagging quadrant. Banks and financials are also losing their momentum and relative strength. Though the realty index is in the leading quadrant and in an extreme zone, it may witness profit booking. All the other sector indices will trade in a subdued mode while IT may renew the momentum. All in all, the market is in a consolidation mode, and we expect volatile moves. Stock-specific activity will continue and may shift to the Large-Caps and IT sector stocks.

STOCK RECOMMENDATIONS

S H KELKAR AND COMPANY ................ BUY ..................... CMP ₹178.80
BSE Code : 539450
Target 1 .... ₹198 
Target 2 ..... ₹210 
Stoploss....₹157 (CLS)

S H Kelkar and Company is a manufacturer of industrial perfumes from the pre-independence era. Today, it is one of the largest fragrance companies in the country and also commands a global presence. It is the only Indian-origin company to file patents for the fragrance and aroma molecules. Its product portfolio includes personal care, hair and skin care cosmetics, and fabric care. It also has food application formats. The company also offers biotechnology research service and cosmetic research services. It filed 18 patent applications for molecules in FY23. The company has developed eight new molecules in the last three years. S H Kelkar has eight manufacturing plants – five in India and three in Italy. Technically, the stock has broken out of an 18-week double-bottom pattern. It also closed above the 38.2 per cent retracement level of the prior downtrend. For the last two weeks, the volume recorded was above the average. Its relative strength line is improving and above the prior high. The Mansfield and Stan Weinstein’s relative strength lines have crossed the zero line, showing outperformance as compared to the Nifty 500. The stock is trading 15.94 per cent above the 50 DMA and 33.52 per cent above the 200 DMA. All the long-term averages are in an uptrend. The weekly MACD has given a fresh bullish signal. The RSI is above the prior high and in the bullish zone. The Elder’s impulse system has formed a strong bullish bar. The Stochastic RSI has given a bullish signal. The stock has cleared the Anchored VWAP resistance. In short, the stock has registered a bullish breakout. Buy this stock above ₹176. Maintain stop loss at ₹157. The short-term to medium-term target is placed at ₹198-210.

ABB INDIA LIMITED ......................... BUY ....................... CMP ₹4,920.40
BSE Code : 500002
Target 1 ..... ₹5,200
Target 2 .... ₹5,386 
Stoploss....₹4,740 (CLS)

ABB India Limited is an integrated power equipment manufacturer, supplying a complete range of engineering products, solutions and services in the areas of automation and power technology. It has electrification, motion, industrial automation, and robotic business segments. About 38 per cent of the revenue comes from electrification and another 38 per cent from the motion segment. The industrial automation segment contributes 21 per cent of the revenue. Technically, the stock is trading near a pivot and an all-time high. After breaking out of a 20-week consolidation, the stock is trading in a tight base. During this tightness, the volumes were lower. The 10-week average acted as a support. The stock is comfortably trading 9.5 per cent above the 50 DMA and 18.29 per cent above the 200 DMA. All the long-term averages are in an uptrend. The daily MACD is about to give a bullish signal, and the RSI has shifted its range into a strong bullish zone. On a weekly timeframe, both indicators are in the bullish zone. As the stock is trading near its all-time high, it has cleared all the resistance. The RRG chart shows that the momentum is picking up, and the stock is in the improving quadrant. The weekly KST indicator has given a fresh bullish signal. In short, the stock is trading at the pivot level. Buy this stock above ₹4,960. Maintain stop loss at ₹4,740. The short-term to medium-term target is placed at ₹5,200-5,386.

*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 January 09, 2024)

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]