NIFTY Index Chart Analysis

The equity benchmark index cleared an important resistance last week and registered breakouts. The Nifty reclaimed the 50 DMA and confirmed the trend reversal. It retraced 50 per cent of the prior fall. Importantly, the index has registered breakout of an inverted head and shoulders pattern. It rallied 1,504.60 points from the bottom of November 21. After an 11.47 per cent decline from the all-time high, this 50 per cent retracement with a higher high indicates the trend of reversal.[EasyDNNnews:PaidContentStart]

At the same time, it also ended the Category 1 correction. Now, only below the recent low of 23,263, the possibility of Category 2 correction (over 20 per cent). For now, it will maintain its position as long as it trades above the 20 DMA of 24,051 with a positive bias. The target of the inverted head and shoulders pattern is 25,813. It can be achieved in the next 4-5 weeks’ timeframe. Before this target, the level of 25,125 may act as strong resistance, and the index may consolidate for some time before taking a directional bias.

However, the Nifty has faced resistance at the 20-week average and failed to close above the 50 per cent retracement level of 24,770. The 20-week average of 24,720 also acted as resistance. The 100 DMA also acted as resistance. At the same time, last week's 2.27 per cent gain, with a lower volume than the previous week, also raises suspicion about the ongoing trend. Normally, counter-trend rallies end at the 50 per cent retracement level most of the time.

With this evidence, next week's close is most important. A positive close will give further confirmation for a trend reversal. In any case, a decline below the 24,481- 248 support zone will be negative, and the 20 DMA can be tested. Only below the 20 DMA, do we need to worry about the market. In such a case, the index may trade above 23,263-25,040 for at least the next three weeks. This consolidation may shape up a new pattern.

On Thursdays, the daily RSI shifted its range into the strong bullish zone. However, a small decline on Friday resulted in a return to the neutral zone. The weekly RSI is above 55, which is a positive sign. There are no negative divergences visible in any time frame. The MACD line is above the zero line, and the histogram shows an increase in the bullish momentum. The +DMI is above the -DMI, which is a positive signal in the direction. The ADX also halted the decline and flattened, which indicates the downtrend has ended.

Many Large-Cap stocks formed a base and some are on the verge of breaking out. The heavyweights in the Nifty, HDFC Bank, L&T, Tech Mahindra and HCL Tech hit new highs. Infosys is almost at the new level. The Nifty IT index has met our short-term target and registered a new all-time high. The Bank Nifty is just about 1 per cent away from an all-time high. The micro-cap 250 index is at a new high. The Small-Cap 100 index is just an inch away from the new lifetime high. The Mid-Cap 100 index has already retraced above 61.8 per cent of the fall.

These are the signs of the market's internal strength. Many stocks have formed a Stage 1 base and are in a transition into Stage 2. The relative rotation graphs show that heavyweight sector index, the Bank Nifty, has entered into the leading quadrant. It is expected to outperform. It is just 1 per cent away from the all-time high. The IT, is services and finance Nifty are also in the leading quadrant. The media, metal, realty and PSU bank sector indices are in the improving quadrant and may have the potential to outperform.

In a nutshell, the benchmark and broader indices have given initial signs of a reversal. However, it needs further confirmation by decisively closing above the 24,720-70 zone of resistance. The index may consolidate for some time, if it fails to move higher. As the IT and BFSI sectors are showing higher relative strength, the probability of a sharp decline is very thin.

STOCK RECOMMENDATIONS

STOCK RECOMMENDATIONS POLYPLEX CORPORATION ..................... BUY ........................ CMP ₹1,464.35
BSE Code : 524051
Target 1 .... ₹1,650 
Target 2 ..... ₹1,820 
Stoploss....₹1,340 (CLS)

Polyplex Corporation is an integrated and diversified manufacturer of plastic film substrates, including thin and thick BOPET, BOPP, CPP, and blown PP and PE.

Technically, the stock has broken out of a 15-week cup pattern and transitioned into Stage 2. It has also broken out of a 77-week cup and handle. The volumes were above average for the last three weeks. Its relative strength is at a new high, indicating its outperformance compared to the broader market. It is well-placed above all the key moving averages.

The stock is trading 36.03 per cent above the 40-week average. All the moving averages are in an uptrend. The weekly MACD is bullish and shows an increased momentum. The RSI is in a strong bullish zone. The Elder impulse system has formed bullish bars. The Stochastic RSI has been bullish and it is trading above the Ichimoku cloud. In short, the stock has registered a bullish breakout. Buy this stock above ₹1,430. Maintain stop loss at ₹1,340. The short-term to mediumterm target can be ₹1,650-1,820.

NIPPON LIFE INDIA ASSET MANAGEMENT ............. BUY ............ CMP ₹805.75
BSE Code : 540767
Target 1 ..... ₹870 
Target 2 .... ₹920 
Stoploss....₹720 (CLS)

Nippon Life India Asset Management manages mutual funds, including exchange-traded funds (ETFs), managed accounts, including portfolio management services, alternative investment funds, pension funds, offshore funds and advisory mandates. It is the fourth-largest asset manager in India, with an AUM size of ₹6.54 lakh crore. It focuses on a strong distribution network with over 1.08 lakh distributors. Its market share is about 8.3 per cent.

The company was promoted by Nippon Life Insurance Company, one of the leading private life insurers in Japan. Technically, the stock is trading at the pivot of a 16-week ascending triangle. It is just less than 2 per cent below the all-time high. Its relative strength line is at new highs, indicating an outperformance. It is well-placed above the key moving averages.

All the long-term and short-term averages are in an uptrend. It is 15 per cent above the 200 DMA. The 30-week average has been acting as strong support during every decline. The weekly MACD is about to give a bullish signal. The RSI is in a strong bullish zone. The Stochastic RSI has been in a bullish set-up. The Elder impulse system has formed strong bullish bars. In short, the stock is about to register a strong bullish breakout. Buy this stock in the zone of ₹775-800. Maintain stop loss at ₹720. The short-term to medium-term target can be ₹870-920.

[EasyDNNnews:PaidContentEnd] [EasyDNNnews:UnPaidContentStart]

[EasyDNNnews:UnPaidContentEnd]