NIFTY Index Chart Analysis

Nifty has formed another lower low and closed at the previous week’s low. It formed a long-legged, small-body candle on a weekly chart. The weekly volumes were the highest in the last six weeks. This means that the index ended with just a 0.64 per cent decline, but the volumes were the highest. The big, bearish candles did not attract this much volume. More distribution occurred during last week. The recovery is limited to two days in the previous efforts of counter-trend. Even the impact of US election results was limited to just one day, whereas the global markets rallied to new highs.[EasyDNNnews:PaidContentStart]

The sizable bear candles and smaller bullish candles in the current downtrend also indicate the bear’s strength. The index has taken support at the 150 DMA for two successive days during the week. It has tried to cross the 24,480-24,500 zone of resistance six times in the last 11 days. Currently, the 20 DMA is also in this zone, which is in a serious downtrend. On the daily chart, the volumes were above average for the last three days, confirming the distribution. Nifty also declined below the August 5 low, which is a major low.

It formed a sizable bearish candle on Thursday and got a confirmation for its implications on Friday. With the above indicators, it is evident that the market has not come out of the bearish grip. In any case, if the index closes below the 150 DMA of 23,983 and the prior low of 23,816, it will result in a negative implication. As mentioned earlier, the 200 EMA is the nearest and the strongest support at 23,539. With this correction, the index will complete a little over 10 per cent correction.

The index has met the 89 per cent target of head and shoulders pattern breakdown. On a longer time chart, the index also met the 100 per cent extension target of the prior major swing. These are some of the reasons for the correction. Fundamentally, the earnings cycle has peaked as many companies downgraded future earnings and did not meet the street’s expectations. When the earnings cycle peaks, the price will also correct to a reasonable value. As of date, as many as 66 per cent of the Nifty 200 companies have downgraded their earnings.

Even the PE ratio of 23 is near the bubble territory (24-30). These earnings negative surprises cycle may continue for another quarter. The current correction is fundamentally driven and may end only when a positive earnings flow begins. Technically, the 200 EMA and 200 DMA of the 23,522-23,539 zone will be critical support. Watch the index’s behaviour around this level. If the index forms the bottom and breaks out on the upside, it will give a good bounce. If Nifty fails to bounce from this zone of support, expect a sharp decline towards the June 4 low of 21,281.

The 61.8 per cent retracement level of the upswing from the October 2023 low is also at 21,679. A move above the 20-week average or 24,776 is the crucial resistance in the short term to medium term. At the same time, the index has multiple resistances around the 24,500- 24,800 zone. The index must close above this zone to form a higher high. Only above this zone may the index get some positive directional bias.

The weekly RSI declined below 50 after October 2023. In any case, if it declines below 40, which is the historical support level, the market will see more pain. The MACD is also showing a strong bearish momentum. The weekly ADX declined to 15.87 and the -DMI is above the +DMI, showing that the trend is in favour of bears. The more smoothened indicator, KST has also given a fresh bearish signal. Expect the index to move in the 23,800-24,500 zone for a period. Any fresh selling pressure will lead to a fresh breakdown, and the 23,500 level can be tested. It is better to stay cautious as the earnings are not at the expected levels.

STOCK RECOMMENDATIONS

ORACLE FINANCIAL SERVICES SOFTWARE ........... BUY ........... CMP ₹11,923.35
BSE Code : 532466
Target 1 .... ₹12,900 
Target 2 ..... ₹13,400
Stoploss....₹11,100 (CLS)

The company provides software services to the financial services industry. It provides financial software, custom application development, consulting, IT infrastructure management, and outsourced business processing services.

Technically, the stock is trading at a minor high of an eight-week consolidation. Its price relative strength (RS) line is at a new high of 84, indicating outperformance compared to the other stocks. The stock is trading above all the long-term and short-term moving averages.

It is 16.39 per cent above the 30-week average and 3.61 per cent above the 10-week average. The weekly MACD is flat and about to give a bullish signal. The RSI is back in the strong bullish zone. The Elder impulse system has formed a strong bullish bar. The ADX (46.10) shows strength in the trend. The +DMI is above the –DMI, which is a positive sign. The stock is above the Ichimoku cloud and MAMA FAMA KAMA band. It is also above the Anchored VWAP resistance. In short, the stock is ready to register a breakout. Buy this stock above ₹11,882. Maintain a stop loss at ₹11,100. The short-term to medium-term target is at ₹12,900-13,400.

KOVAI MEDICAL CENTER AND HOSPITAL .............. BUY........... CMP ₹5,442.95
BSE Code : 523323
Target 1 ..... ₹6,200 
Target 2 .... ₹6,500 
Stoploss....₹5,130 (CLS)

The company is in the business of healthcare services. This Coimbatore-based organisation operates speciality hospitals in Coimbatore, Sulur, Erode and Kovilpalayam. It has a total capacity of 2,250 beds. Its diagnostic services segment contributes 21 per cent of the revenue. The company had spent a total of ₹220 crore to acquire the new technologies. The main hospital in Coimbatore has state-of-the-art equipment, including robotic surgical system, Varian Trilogy Linear Accelerator, advanced PET CT scan, MRI, CT scanner, EBUS, ECMO machines, and more. Technically, the stock is trading at an 11-week consolidation pivot and near an all-time high. All the long-term and short-term averages are in the uptrend. Its price relative strength is good at 81, which indicates outperformance compared to the other stocks. With its strong earnings, institutional investors have increased their stake in the company by 4. 58 per cent in the recent quarter. The RSI took support at 60 and bounced. The MACD is about to give a bullish signal. The Elder impulse system has formed a strong bullish bar. The stock is well above Daryl Guppy’s GMMA indicator, and all the short-term and long-term averages are in an uptrend in ascending order. The stock is above the Ichimoku cloud. In short, the stock is ready to register a bullish breakout. Buy this stock in the range of ₹5,450-₹5,510. Maintain a stop loss at ₹5,130. The short-term to medium-term target is at ₹6,200-6,500.

*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 November 11, 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.

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