Nifty Index Chart Analysis

The Nifty index picked up an astounding 700 points from the lows of 6825 which was registered on the union budget day. This month so far has been a very cheerful month for the bulls as the index had marked a couple of noticeable records like record for highest absolute gains in a single day and largest weekly absolute gains over the last six years.

Factors which helped to improve sentiments of the market were as follow, withdrew of a disputable budget proposal to tax 60 per cent of Employee’s Provident Fund (EPF) balances at the time of withdrawal, rupee gratefulness against the dollar, smart recovery in the crude oil prices, strong sense of optimism towards a rate cut by the RBI, positive flow of data from different parts of the globe, smooth passage of the Real Estate Bill in the upper house i.e. Rajya Sabha and last but not the least, a positive inflow of funds from the foreign investors after a long time.

As can be seen on the Nifty weekly chart, after showing a scintillating rally of over 6 per cent as on weekend March 4, 2016, the index took a pause and shifted into sideways range movement throughout the week. In this process, the index formed a small body candle pattern, which indicates temporary halt in the upside momentum after a strong move. At present, the index is consolidating around the previous important zone which was around 7500-7660 and as per the theory after a breakdown of the previous support zone, the previous level of support changes its role and becomes a new area of resistance.

Now going forward, the zone of 7610-7730 will act as a strong hurdle for the index. Why this zone of 7610-7730 will act as a resistance zone-firstly, the level of 7605 is swing high level for the year 2016 and secondly, the level of 7730 is 61.8 per cent for the up-move from the low of 6862 to high of 9119.20. If the bulls manage to pierce through this resistance zone, index is likely to start a fresh leg of up-move which will take index up to levels of 8000-8100. On the downside, the zone of 7330-7350 is important support for the index. If this support level is breached index is likely to test levels of 7120-7150 on the downside.
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The index after moving strongly from the lower levels of 6826 to 7583, it has created multiple gaps which are unfilled and have remained unchallenged. It has been observed in the past six trading session, the index has been consolidating in the range of 7400-7583. In this process on the daily time frame, the index has completed a Bearish Harmonic Pattern known as the Shark Pattern. In this pattern the first Leg is XA i.e. from 7675 to 6869, second leg is AB i.e. from 6869 to 7252.40, third leg is BC i.e. from 7252.40 to 6826 and last leg CD i.e. from 6826 to 7583. As on 14^th March, 2016 the index has formed a potential DOJI and this indicates indecisions between bulls and bears.  Considering the Bearish Shark Pattern and Doji Candlestick its likely index may enter into a corrective phase. However, the view and the pattern will negate if the index close above levels of 7610. The daily 14-day RSI at present is quoting around 60 levels and it’s been trading in the range for last year or so. The RSI needs to sustain above levels of 65 to exhibit further strength in the market. 

On the daily time frame important support for the index is placed around 7400, once this level is breached index will start its journey to fill the gaps which were created in the recent up-move and next important support is placed around 7235. On the upside multiple resistances is placed in the zone of 7570-7610. The bulls need to sustain above this resistance zone for continued upward momentum and if it does its likely to scale up to levels of 7790-7830.

At present the index is trading above its important short term moving average i .e. 21-day EMA (7360), 50-day EMA (7413) and the other hand it is trading below its important long term moving averages i.e. 100-day EMA (7583) and 200-day EMA (7788). This indicates that trend for the short term is in the favour of bulls and the medium-long term on the daily chart is in the favour of the bear’s.  

Conclusions (After Putting All Studies Together)

-         The short term trend is in the favour of the bulls; as long as support levels of 7400 is intact buy on dips will be right approach.

-         The intermediate trend turns neutral, however, if the index trades above 7610 its likely to witness shift to the bullish trend.

-         The long term trend is down as index has been forming lower top and lower bottom pattern on the weekly chart and it has been trading below its 200 day EMA on the daily chart.
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SELL AJANTA PHARMA:

The stock is currently trading at Rs 1417. Its 52-week high/low stands at Rs 1720/ Rs 1088 were made on August 12, 2015 and March 23, 2015. On the daily time frame after registering high of Rs 1720, the stock entered into corrective phase and formed sequence of lower top lower bottom pattern. At present, the stock has formed a Bearish Harmonic Pattern known as ‘Bearish AB=CD’. The stock has been facing resistance around its 200-day EMA and recently the stock has turned down after touching its 200-day EMA which indicates the stock is facing supply around its long term moving average. Stock has formed multiple tops around levels of Rs 1451-1460. Hence, traders can initiate a short position in the stock for a price target of Rs 1365-1320 and traders can maintain a stop loss of Rs 1476.  

BUY AMARA RAJA BATTERIES:

The stock is currently trading at Rs 916. Its 52-week high/low stands at Rs 1128/ Rs 774.15 were made on August 25, 2015 and January 18, 2016. On the daily time frame, the stock after registering its 52-week low in the month of January has moved above its long term moving average i.e. 200-day EMA. Recently, the stock has breached its important resistance zone which was placed in the zone of Rs 907-913 along with rise in the volume. On the daily time frame, the stock has also witnessed breakout of Inverse Head and Shoulder Pattern and on March 14 it has managed to close above the neckline of the head and shoulder pattern. The momentum oscillator like RSI is quoting at 61 levels, which indicates strength in the momentum. Considering the breakout of inverse head and shoulder pattern along with decent volumes and the RSI sustaining above 60 levels it’s likely that the stock continues to move in the northward direction and traders can buy this stock for a target price of Rs 965-990 with a stop loss of Rs 870.