NIFTY Index Chart Analysis

The stock market is finding itself in a jittery position amid low voter turnout. As a result, volatility has spiked and the NSE benchmark Nifty 50 index declined below the 20-week average last week. This decline was the first time the index slipped downwards after October last year. As the index decisively closed below the 10-week average and the 50 DMA, the market status changed to ‘uptrend under pressure’. On Monday, the home minister’s comments helped the index to recover from its lower levels and close with gains of 0.22 per cent, resulting in the prices coming back into a rising channel.[EasyDNNnews:PaidContentStart]

Interestingly, the index bounced exactly from the 100 EMA of 21,821. A series of supports was placed in the 21,860-710 zone. Once this support zone breaks, we will see panic selling pressure in the market. If the index closes below the 21,860-710 zone of support, it will enter into a confirmed downtrend. Currently, the index is 0.86 per cent below the 50 DMA. The daily price pattern resembles a double-top, a formation that could have significant implications for Nifty. The valley point is at 21,777.

If the double-top pattern breaks down on a weekly basis, accompanied by added distribution days, it could signal a strong negative trend in the short term. The 38.2 per cent retracement of the current uptrend is at 21,283. In a bearish scenario, Nifty could test this level if the crucial support zone breaks down with a higher volume. It’s worth noting that for the last seven weeks, the volumes have been below the average. The formation of bearish candles, such as a shooting star and a gravestone Doji, at the two tops is also a cause for concern.

India VIX, the volatility indicator or fear index, rose by 121.91 per cent from the low of 9.85 to 21.88 as of April 23. This extraordinary spike in the market indicates more volatility due to event risk. On a closing basis, it is the highest level after June 2022. At the same time, Nifty has been losing relative strength since April 2023 compared to the broader market. This underperformance is also a reason to be cautious. Currently, Nifty is trading around the rising channel’s support line, also within the support zone of 21,860-710.

Typically, the market will discount the probable event risk much earlier. Expect the fall to halt in another two weeks and it may form a base or short-term pattern. We may get a clear directional bias by May 24, before the election outcome. A breakout or breakdown will happen on the outcome of general election. It is crucial to understand that returns come in phases, and those phases are known only in hindsight. The equity markets never give linear returns as investors expect. The market journey so far has been as follows:

▪️1995-1999: Huge returns.
▪️ 2000: Big drawdowns.
▪️ 2001-03: Consolidation and minor returns.
▪️ 2004-07: Huge returns.
▪️ 2008: Big drawdowns.
▪️ 2009-13: Consolidation and reasonable returns.
▪️ 2014-17: Huge returns.
▪️ 2018-2020: Consolidation and drawdowns.
▪️ 2020-24: Mind-blowing returns.

Overall, the investor’s portfolio returns are significantly higher than the benchmarks.

There is not much change in the relative rotation graphs. The Metal index looks strong in the leading quadrant as it has better relative strength and momentum. The Auto index is losing its momentum and may underperform. The Consumer Durable index is about to enter into the leading quadrant. The indices of Bank Nifty, Fin Nifty and FMCG Nifty are in the improving quadrant and may outperform in the next week. All the sector indices were seen losing momentum and relative strength. For now, the market is very volatile and will continue to be so for the next four weeks. It is better to avoid derivatives and stick to highly conviction stocks in the portfolio. Try to book some profits and stay on the sidelines with more cash.

STOCK RECOMMENDATIONS

FINEOTEX CHEMICAL LTD. .................. BUY ...................... CMP ₹354.25
BSE Code : 533333
Target 1 .... ₹410 
Target 2 ..... ₹434 
Stoploss....₹330 (CLS)

The company is one of the leading manufacturers of chemicals for the textiles, construction, water treatment, fertiliser, and leather and paint industries. Fineotex Chemical manufactures and provides an entire range of products for the pre-treatment, dyeing, printing, and finishing processes for textile processing to customers across the globe. It is a speciality chemical producer with a focus on the textile industry. It also provides customised technical solutions and services. The company has been successfully diversified into the cleaning and hygiene business. This expansion allows Fineotex Chemical to diversify its business and revenue streams while leveraging its core competencies. Numerous chemical compounds that are utilised in the textile speciality segment have potential applications in the cleaning and hygiene segment as well. The stock is taking support at the 40-week average and moving higher. It has formed higher lows and higher highs. It has not had any lower low on a weekly chart since March 2020. The stock breached the 40-week average last week but bounced back to an upper limit. Its EPS strength of 96 shows earnings consistency. Its Relative Strength (RS) line is at 47 and rising. The MACD line is below the signal line. The Elder impulse system has formed a neutral bar. It is above the Ichimoku cloud. In short, the stock is fundamentally strong and taking support at the long-term average and bouncing. Buy this stock at ₹363 and maintain stop loss at ₹330. The short-term to medium-term target is ₹410 followed by ₹434.

TIMKEN INDIA LIMITED ..................... BUY ...................... CMP ₹3,729.80
BSE Code : 522113
Target 1 ..... ₹4,250 
Target 2 .... ₹4,500 
Stoploss....₹3,265 (CLS)

A Timken Company subsidiary, Timken India manufactures bearings. It has manufacturing plants in Jamshedpur and Bharuch to serve the domestic bearings market. The company’s technology centre in Bengaluru provides customers access to engineering expertise and the latest technological advancements. It manufactures, distributes and sells antifriction bearings, primarily tapered roller bearings, cylindrical roller bearings and other compoenents and accessories. The company is also engaged in power transmission product brands and partners with renewable energy companies to power some of the world’s largest windmills. It offers products to defence, mining, aerospace, and agriculture, rail, energy and automobile industries. Technically, the stock has broken out of a 39-week double bottom of Stage 1. It closed above the prior high and is trading above all the long-term averages. Its Relative Strength (RS) line is rising and above the 21-week EMA. The moving average ribbon is in the uptrend, trading 18.51 per cent above the 50 DMA and 13.31 per cent above the 200 DMA. The weekly MACD line is above the zero line, and the histogram shows a strong bullish momentum. The weekly RSI is in a strong bullish zone and above the prior high. The KST has given a fresh, bullish signal. The Stochastic RSI is already in the bullish mode. It is above the Anchored VWAP resistance and Ichimoku cloud. The ADX line is rising, and the +DMI is above the –DMI. In short, the stock has registered a bullish breakout. Buy this stock above ₹3,500 and maintain stop loss at ₹3,265. The short-term to medium-term target is placed at ₹4,250 followed by ₹4,500.

*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 May 14, 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]