NIFTY Index Chart Analysis

The Nifty registered its third-highest weekly closing in the previous week, and currently it is just another 225 points away from the all-time high and just 62 points away from the all-time high weekly closing. Earlier, the highest weekly closing was at 18,696.10. It formed another bullish candle on a massive move. It took support at 20 DMA twice in the last six days. Nifty gained and lost in alternate weeks for the last six weeks. All the bearish patterns failed to get a confirmation for their implications.

A bearish Engulfing, Shooting Star and As the market got a whiff of this development, the bulls came back with renewed strength. The S and P 500 has already made a new swing high as the technology stocks rallied the most. The Nifty has formed three bases before the current level in the nine-week rally. Except for two weeks, the volume is level, there are minor supports at Friday’s low and 18,303, which is 20 DMA. Since March last week, the Nifty has not closed below the prior week’s low. In the bull case scenario, if the Nifty closes above 18,696, it will test 18,965 in 6-8 trading sessions. The weekly 14-period RSI finally shifted its range into the strong bullish zone after the last week of November 2022. However, the negative divergence in daily RSI still persists. The MACD on a daily chart has given a fresh bullish signal. The Nifty closed above the long resistance line drawn from the March 2020 low. For the last four weeks it has been oscillating around this line. After a strong bullish candle, the index needs a followthrough to continue the bullish strength.  




Dark Cloud Cover candles are known for strong bearish sentiment when they form at the swing high. But, this time, all these bearish candles failed. As the Nifty is at a near-all-time high, we are entering into the decisive phase of a trend. If the Nifty closes above 18,888, on a weekly basis, with strong volume support, we can consider the last 84 weeks of consolidation to be a Stage 1 base. The Nifty is at the cusp of an 84-week consolidation breakout. Irrespective of the US debt ceiling crisis, the global and domestic markets rallied impulsively in the last week. On Saturday, the White House and the Republicans reached a tentative deal on the debt ceiling. It may lead to a pause in quantitative tightening below the average. The high volume up days is the hallmark of buying interest. Now, the rally with low volume shows a lack of conviction in buying interest in the market. The Nifty may open with a positive bias and may test the level of 18,696-18,887 quickly. On Monday, the index already registered a gap-up opening and on Tuesday it closed near the level of 18,696. It needs to sustain above the Monday gap area to make a new high. If it faces resistance at around the 18,662-18,887 zone and is unsuccessful in making a new high in the next 3-4 days, it may lead to profit booking. 

But only a close below the prior week’s low (18,178) will be negative. Before this The bank, financial and automotive indices are back in the leading quadrant with high momentum and relative strength. FMCG, automobiles and bank Nifty indices are making new highs. The indices of consumer durables, pharmaceutical and oil and gas sectors are in the improving quadrant and may enter into the leading quadrant if the momentum continues. Even though some sector indices are making new highs, the index components are not. This divergence indicates index management. For the next 2-3 weeks, watch the 18,178-18,887 zone for a fresh breakout. Either side breakout will result in a strong trending move. Stay positive for now with strict risk management. Continue with select stock-specific views, which have had a high relative strength compared to the broader market.  

STOCK RECOMMENDATIONS

ITD CEMENTATION INDIA LTD. .............. BUY ..................... CMP ₹154.75

BSE Code : 509496
Target 1 .... ₹180 
Target 2 ..... ₹200 
Stoploss....₹130 (CLS)

 

ITD Cementation is a market leader in maritime structures and foundations. With its eight-decade reputation of constructing some of the most prestigious and vital projects, it is a preferred contractor for highways, bridges, flyovers and industrial structures and has established a strong presence in tunnels, dams and other infrastructure projects. It has also executed large commercial and institutional buildings, elevated highways, viaducts, railways, elevated and underground metro rails, airports, water and wastewater treatment plants, pumping stations, water piping and utilities. It has a strategic network of offices in Mumbai, Kolkata, Delhi and Chennai. The stock is trading above the prior pivot of the 24-week cup pattern. Its price relative strength is also at a new high, showing outperformance compared to the broader market. 

It has retraced by 61.8 per cent of the previous major downtrend. For the last seven weeks, the volume recording has been above average. As the stock is trading above the pivot, it has cleared all the resistances and is above all the key moving averages. Currently, it is 21.06 per cent above the 10-week average and 31.07 per cent above the 40-week average. All the long-term and short-term averages are in an uptrend. The weekly MACD and KST indicators are in a bullish setup. The stock is trading well above the Ichimoku cloud and Anchored VWAP resistance. In short, the stock has registered a bullish breakout. Buy this stock in the zone of ₹147-155. Maintain a stop loss at ₹130. The short-term and medium-term targets are at ₹180 and ₹200


AIA ENGINEERING LTD. ................... BUY ........................ CMP ₹2972.75

BSE Code : 532683
Target 1 ..... ₹3170 
Target 2 .... ₹3260
Stoploss....₹2890 (CLS)  
 

AIA Engineering Ltd. specialises in designing, developing, producing, installing and servicing high chromium wear-resistant parts for grinding types of equipment in cement, mining and quarry industries. The company offers custom-designed solutions in ideal metallurgy for the application. It also offers process optimisation services based on a technical assessment of customer needs. Its international marketing arm, Vega Industries, is engaged in services and innovation, establishing a strong reputation as a global solution provider. It is the world’s largest producer of high chrome mill internals. It has six manufacturing facilities with 522,000 metric tonnes per annum. The company has decided to go ahead with its brownfield capacity expansion of grinding media.It plans to add 80,000 metric tonnes capacity with an estimated capex of ₹200 crore. Currently, the order book is at ₹770 crore as of April 2023. Technically, the stock has broken out of a seven-week flat base with above-average volume. Prior to the current base, it formed two bases and formed higher highs and higher lows. The stock is clearly in an uptrend. It is trading at a lifetime high. It formed a strong bullish candle with renewed buying strength. The stock is comfortably trading above all the key moving averages. Currently, the stock is 10.39 per cent above the 40-week average and 4.89 per cent above the 10-week average. The weekly MACD and KST indicators are about to give bullish signals. The RSI has shifted its range into the strong bullish zone. It has cleared all the resistances, including Anchored VWAP, and is trading well above the Ichimoku cloud. The Elder Impulse System has formed a strong bullish bar. In short, the stock is at a new high and breaking out of a flat base. Buy this stock above ₹2,990. Maintain a stop loss at ₹2,890. The short-term to medium-term target is ₹3,170-3,260.

(Closing price as of May 30, 2023)

*LEGEND: ■  EMA - Exponential Moving Average. ■  MACD - Moving Average Convergence Divergence ■  RMI - Relative Momentum Index ■  ROC - Rate of Change ■  RSI - Relative Strength Index

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.