Nifty Index Chart Analysis

Bulls are here to stay, Nifty movements assure that

In the truncated week that passed by, the markets moved within a narrow range. Though, important highlights were the encouraging cues from the Q4 results. After better than anticipated results from Infosys, the index heavyweights like Reliance and HDFC Bank also surprised the Dalal Street. TCS did disappoint on the growth factor but it still managed to beat the street estimates for the first time in the past seven quarters. However, the joker in the pack was the banking shares, mostly the PSU banks as they clocked solid gains of over 2.5 per cent, after the Reserve Bank of India (RBI) agreed to be lenient with NPAs provisioning in the Q4.

Technically, on the weekly time frame Nifty had formed a ‘spinning top’ candlestick pattern and this candlestick pattern has long upper shadow, long lower shadow and small real body. This candlestick indicates indecision. This candlestick pattern formed near resistance levels indicates the momentum will halt and market is likely to lose momentum. There are multiple resistances placed in the range of 7970-8000 first the level of 7972 is 50 per cent retracement of downtrend from the higher levels of 9119.20 to 6825.80. Secondly, the swing high which was registered in the month of January, 2016 now has been placed around levels of 7972. Once Nifty confirms breakout and sustains above the zone of 7970-8000 on weekly chart, it is likely to scale up to levels of 8230-8450 but till then index is likely to go through sideways and consolidation movement.  On the downside, level of 7700 is a crucial support mark and next important level is placed around levels of 7510. 

On the daily time frame, Nifty formed side by side negative candlestick pattern as on April 21, 2016. Nifty is forming a ‘rising wedge’ pattern. Now going forward, Nifty has immediate support around levels of 7820-7830. Once this zone is breached, Nifty is likely to test its 200-day EMA, placed around 7770 level and the ‘run away gap’ which was observed on April 13, 2016 also placed around these levels. However, the bullish undertone of the market will hamper if the 200-day EMA and the ‘run away gap’ is breached on the closing basis. The area of 7970-8000 would remain a key hurdle for the bulls in the short term. Once this level is breached along with volumes, it’s likely to move up to levels of 8180-8300 in the short term.  The daily momentum oscillator RSI is quoting around levels of 66 and has not yet push the market into an overbought situation. Hence, after a brief momentum of consolidation, market is likely to pick up.

At present, the index is trading above its important short-medium-long term moving average i .e. 21-day EMA (7712), 50-day EMA (7600), 100-day EMA (7630) and 200-day EMA (7771). This indicates that trend for the short-medium-long term is in the favour of bulls.

Here are 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 bulls; however, formation of Candlestick suggests we can see some consolidation. 

-         The intermediate trend is in the favour of the bulls and only a breach below ‘run away gap’ which changes the course of trend.

-         The long term trend has shifted in the favour of the bulls, however, the sequence of lower top lower bottom is not breached on weekly chart, and confirmation on the weekly chart will fuel the momentum on the upside. 
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The stock is currently trading at Rs 403. Its 52-week high/low stands at Rs 484/ Rs 290 made on January 10, 2015 and February 29, 2016. On the daily time frame, the stock has witnessed breakout of reversal pattern i.e. “Rounding Bottom Pattern” on April 18, 2016. At present, the stock has re-tested the breakout levels; hence, traders can enter the stock at current levels. The stock is trading above its long term moving average i.e. 200-day EMA, which confirms the bullish trend in the stock. The momentum oscillator RSI is indicating strength, which is positive for the stock.  Taking into consideration the reversal pattern and strength in the momentum oscillator, we suggest buying this stock with stop loss of Rs 375 for a target of Rs 449-465.