Nifty Index Chart Analysis

The week kicked off with the market playing on a cautious note as investors and traders awaited the bi-monthly policy review of the Reserve Bank of India (RBI) which was scheduled as on April 5, 2016. The market marked huge loss on the policy day as the outcome was in line with the expectations of the market participants. Going forward, the corporate India goes into another income season; it is going to be a crucial for an assortment of reasons. Firstly, there are hopes of up-turn after about couple of awful quarters. Secondly, banks are liable to see more write-offs and IT organisations are prone to be hit by frail IT spending globally.

Technically, on the weekly time frame, Nifty had formed a hanging man candle in the previous week and the confirmation for the said pattern is given during the week as Nifty formed a big bear candle which indicates bears have resumed their momentum. Now going forward, the level of 7500 is an important support for the index on the weekly timeframe. In case, if Nifty breaches this support zone, it will open up for a correction up to the levels of 7230-7180. On the upside, the zone of 7770-7800 will act as a strong resistance zone for the index. If we fail to cross this resistance zone in the coming weeks it should confirm that the current rally was just a pullback rally and index registered a lower top.  

Nifty Index Daily Chart Analysis

On the daily time frame, Nifty after registering the swing high around levels of 7778 formed a sequence of lower top lower bottom. In addition, Nifty has faced strong supply at 200-day EMA which is acting as a very strong resistance. Overall, the zone of 7770-7790 will act as a strong resistance for the Nifty. Further upside is expected in Nifty only if it manages to stay above this zone of 7770-7790. On the downside important support range is placed at 7480-7500 and if it sustains below this zone expect a downside up to levels of 7340-7220.

The daily momentum oscillator RSI surged above 60 levels and after scaling up to levels of 65 levels, it has seen a sharp correction and at present its hovering around levels of 50. As per the bullish range theory, it’s likely to touch the levels of 40 on the downside.

At present the index is trading below its important short-medium-long term moving average i.e. 21-day EMA (7575), 100-day EMA (7598) and 200-day EMA (7765). This indicates that trend for the short-medium-long term is shifted in the favour of bears.  

Here are the key levels to watch out for the short term 

Conclusions (After Putting All Studies Together)

-         The short term trend is in the favour of the bears; as it’s trading below important short term moving averages.

-         The intermediate trend is sideways a breakout below 7480 will confirm trend shifting in favour of bears.

-         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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Stock Recommendation:

BUY WHIRLPOOL:

The stock is currently trading at Rs 735. Its 52-week high/low stands at Rs 847/ Rs 555.55 were made on July 21, 2015 and February 12, 2016. On the daily time frame after registering high of Rs 847 the stock entered into a corrective phase and formed sequence of lower top lower bottom pattern. At present, the stock has witnessed breakout of horizontal trend line along with rise in the volumes, which is positive for the stock. The daily momentum oscillator RSI for the first time in the past 7-8 months has managed to sustain above levels of 65, this confirms the momentum in the stock. Considering the breakout of horizontal trend line along with high volumes and support by the momentum indicator I.e. RSI we recommend to enter into this stock for a price target of Rs 785 and 810 with a stop loss of Rs 695.

SELL ARVIND:

The stock is currently trading at Rs 265. Its 52-week high/low stands at Rs 365.70/ Rs 216.30 were made as on 06^th January, 2016 and 16^th June, 2015. On the daily time frame the Stock has witnessed breakout of Bearish Pattern i.e. “Head and shoulder” in the month of February. After the breach of neck line of head and shoulder the stock went on to touch levels of Rs 235 in a quick time. At present, the stock has re-tested the neckline of the Head and Shoulder pattern and faced resistance around its 200-day EMA and has entered into a corrective phase. Hence, we expect the correction to prolong as supply was observed around the neckline level. Considering this, traders can initiate a short position in the stock with a stop loss of Rs 283 for a target price of Rs 240 and 232.