NIFTY Index Chart Analysis

The domestic markets experienced volatile moves, whereas the global markets declined sharply on the downside. The Nifty traded in a 611 points range and finally closed flat last week. But it declined 238 points from the week's high. It opened with a gap down and made a lower low. The Index has faced resistance at the sloping trendline drawn from October 2021 high.

For the past three weeks, it has been testing the resistance line and failing to surpass it. Earlier as well two major swing highs formed at this trendline resistance. As a rule, seventh resistance is a rare phenomenon. Importantly, the 23.6 per cent extension of the current consolidation is exactly placed at 17801. For the last three weeks, this has been a herculean task for the index. Even on the daily chart, the Nifty is just shy of crossing the trendline except for August 30. It has been seen oscillating around the trendline for the last nine days. Indian market's resilience to fall has surprised everyone. The Dow Jones index fell over 8 per cent from the August 16 high. And it did not show any signs of recovery above the previous week's low and closed at the lowest level of the week. Importantly, it closed below the 61.8 per cent retracement level of the prior upswing.

The S&P 500 declined by 9.3 per cent. The tech-heavy Nasdaq is down by 12 per cent. But, our benchmark index, Nifty down is down by a meagre 2.5 per cent, and the broader index Nifty 500 declined by only 1.58 per cent. The Nifty IT index is the only worst performer as it is down by about 9 per cent from the recent swing high. All the IT majors declined by 6-12 per cent. This is the only sector acting as a hindrance to the breakout. On a Year to Date (YTD), the Dow has declined by 14 per cent, and the DAX has lost 21.14 per cent. Meanwhile, the Nifty is flat. Technically, the Nifty has formed two consecutive inside bars. After 600 points move, the two-days consolidation is seen below the important short-term moving average i.e., 20DMA. The failure of the index to breakout in the previous week has given an initial reversal sign, as it formed a shooting star candle. It also got confirmation by closing below the shooting star low last week. The RSI has declined to a neutral zone. The declining MACD and KST lines on all time frames are also showing a loss of momentum. We keep mentioning declining Relative Strength. It shows the underperformance of the benchmark index compared to the broader market. During the current upside swing, Mansfield's relative strength indicators are below the zero line and are currently almost at the lowest level.

On a weekly chart, the Nifty formed a candle formed a lower low candle. Though it made a higher high, it faced resistance, but it failed to sustain at higher levels as a result forming an upper shadow as well. Meanwhile, on the daily chart, the Index traded within Wednesday's range but formed bearish bars on the elder impulse system. The Nifty is holding the 23.6 per cent retracement level except on Tuesday. The breakdown failed with a massive 446 points short-covering rally. As the Bollinger bands are narrowing and flatten, expect consolidation between the 17950-17250 zone for a few more days. As the Index is already below the 20DMA for the last two days, the probability is on the downside. For a decisive breakdown, it has to close below the level of 17329 for at least two days. A big gap down and negative close at the beginning of the next week also gives an early signal for reversal. As mentioned above, the 17800-18115 is a crucial resistance zone. A weekly close above this zone will open the gates for a new high. Generally, a breakout after several resistances testing will be an impulsive one. In such cases, the upside target is placed at the level of 19421. This is the most optimistic view in a bull case scenario. The only positive thing is, that the index is still with only two distribution days. Next week, it is likely to have a stock-specific activity. If the index avoids the gap down, the Nifty may consolidate within said range. Be with the neutral strategy on the index. As long as it trades above 17329-166 zone, better avoid aggressive shorts.

STOCK RECOMMENDATIONS
 

MAHINDRA HOLIDAYS AND RESORTS INDIA ............. BUY .......... CMP ₹283.95

BSE Code : 533088
Target 1 : ₹314 
Target 2 : ₹334 
Stoploss : ₹250(CLS)

Mahindra Holidays and Resorts India is a part of the Mahindra Group's leisure and hospitality business and offers family holidays primarily through vacation ownership memberships. It has established itself as the market leader in the family holiday business. The vacation ownership member base crossed the 2,50,000 mark. Club Mahindra is the company's flagship product in the vacation ownership business, which entitles members to a week's annual holiday for 25 years. It has over 100 resorts in India and abroad. The company has been established as a market leader in the holiday business. Post covid, During the Q4 FY 2022, the occupancy increased to 89 per cent. It is expanding the rooms in some select resorts. Technically, the stock has broken the 16-week Stage-1 cup pattern. The volume has been recorded above average for the past four weeks. The Relative Price Strength (RS) rating is at 75, and the Mansfield relative strength line is above the zero line. The stock is trading above the key moving averages. It is 19 per cent above the 50DMA and 27 per cent above the 200DMA. All the short and medium-term averages are in an uptrend. It is also above the 50 weekly moving average, and the 20 periods RSI is above 60, which is a strong long-term positive. The ADX is showing improving trend strength. MACD shows an increased bullish momentum. The Elder impulse system has formed a strong bullish bar. KST and TSI indicators are in a bullish set-up. The stock is also above the Anchored VWAP resistance. In short, the stock has broken Stage -1 base. A move above ₹275 is positive, and it can test ₹314-334 in the short to medium term. Maintain a stop loss at ₹250.

GMM PFAUDLER ................ BUY ................ CMP ₹1,826.55

BSE Code : 505255
Target 1 : ₹1,915 
Target 2 : ₹2,300 
Stoploss : ₹1,700 (CLS)

GMM Pfaudler is a global leader in corrosion-resistant technologies, systems, and services for the chemical, pharmaceutical, food and energy industries. The company is synonymous with chemical processing and corrosion resistance. With an end-to-end solutionsoriented approach, a global footprint, and a perfectly integrated offering system, the company can meet complex industry demands worldwide. A strong workforce drives GMM Pfaudler across four continents and 14 global manufacturing facilities around the world. Technically, the stock has broken out of a 29-week, Stage-1 double bottom pattern with an above-average volume. Its Relative Strength line is near a new high, and its Relative price strength (RS) rating, as high as 71, indicates outperformance compared to other stocks. The stock has also broken the 66-week consolidation and is trading above the key moving averages. It is 21 per cent above the 50DMA and 21 per cent above the 200DMA. Both averages are in an uptrend. It is trading above the 50 weekly moving average along with 20 periods RSI above the 50 zone, which is a bullish sign. The Weekly MACD shows a strong bullish momentum with the ADX (18.51) rising and showing improving trend strength. The +DMI is above the -DMI is another positive factor. It is trading above the Anchored VWAP. The Elder impulse system has formed the strongest bullish bar. The weekly KST and TSI are in a bullish set-up. The RRG RS and momentum are above the 100 zone, indicating a strong price performance. In short, the has broken out of Stage-1 consolidation. A move above ₹1811 is positive, and it can test ₹1915 in the short term and ₹2300 in the medium term. Maintain a stop loss at ₹1700.

*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.

(Closing price as of Sept. 02, 2022)