NIFTY Index Chart Analysis

The global tremors are becoming increasingly violent. There have been consistent cases of being up one day and down the other with big swings. Gap opening and intraday recoveries have become habitual for the equity markets. After the US CPI data announcement, the Dow index opened sharply lower and recovered 1,400 points from the opening lows on Thursday. This has influenced the Indian market to recover the losses at the weekend on Friday. As the benchmark index recovered over percentage points, the Nifty has formed an inside bar on the weekly chart. Otherwise, it would have been a negative candle. 

Interestingly, on Friday, the index opened above the 20 DMA but failed to sustain above the important moving average. It opened with an over 300-point positive gap before closing with gain of 1 per cent, but it declined over 150 points from the day’s high. At the beginning of the current week, the Nifty opened flat to negative but closed above the key moving averages on a positive note. This kind of volatility has triggered stop losses on both the sides. On the other side, the gap openings have hit the positional traders quite hard. Technically, there is no change in the direction. 

The market is still in a state of consolidation. Consolidation is going on between the long-term 200 DMA and the short-term average 50 DMA. The inside bar and the narrowing Bollinger bands suggest that the consolidation may continue for some more time. The high of October 6 is a minor swing, which is also a resistance point. Above this, the 50 DMA of 17,491 is the next level of resistance. A decisive close above thiszone is crucial for turning on a bullish bias. At the same time, there are no positive divergences established yet in any of the leading indicators. 

The Anchored VWAP acted as a support for the week. The Relative Strength Index continues to be at 50 and in a neutral zone. The MACD line is below the zero line. The negative directional indicator, - DMI, is currently dominating, and the ADX is almost flat for now. In the near to medium term the 200 DMA of 16,988 and the 200 EMA of 16,908 will prove to be a crucial support zone. After one day of trading below the 200 DMA last week, it bounced back. In any case, a close below 16,912 or a recent swing low of 16,747 will be very crucial for the medium-term trend. Interestingly, the rising trend line support is near the 200 DMA. So, a break below 16,980 will give an early signal for downside probabilities.

The rupee recently tumbled to an all-time low and we estimate it may head towards the level of Rs 84 in the near term. Importantly, the foreign exchange reserves also declined to USD 532.88 billion from the all-time high level of USD 645 billion in October 2021. The decline in the rupee value and the fall in equities are systematic moves. Alongside the dollar-rupee equation, the FPI flows are once again seeing aggressive outflow. Last week, they sold more than Rs 9,900 crore. If the dollar rises further, we may see further FPI outflows. The relative rotation graphs analysis shows that the Nifty Mid-Cap, Bank Nifty and financial services indices, which are in the leading quadrant, are sharply giving up on their relative momentum against the broader markets. 

The metal, media and IT indices are also inside the improving quadrant. The metal index will enter the leading quadrant if there is any gain in momentum. The indices need to gain relative strength and momentum to outperform the broader market. For now, the equity markets are trickily placed for the near term. Trading indices will be a challenging task. As the earning season has already begun, it is better to focus on growth stocks which have declared more than 20 per cent acceleration in earnings. Stock-specific activity will continue. Avoid highly leveraged position trading and invest in high relative strength stocks with a new high price.

BLUE STAR LTD. ............................. BUY .........................CMP ₹1210.10

BSE Code : 500067
Target 1 .... ₹1380 
Target 2 ..... ₹1400  
Stoploss....₹1,140(CLS)

Blue Star is India’s leading air-conditioning and commercial refrigeration company. It has five modern manufacturing facilities and two new state-of-the-art facilities being set up, a network of 31 offices and 3,950 channel partners. Blue Star’s integrated business model of a manufacturer, contractor and after-sales service provider enables it to offer end-to-end solutions. Every third commercial building in India has a Blue Star product installed. Technically, the stock has broken out of a 25-week cup and handle pattern. Above average volume was recorded last week. It is trading above the key moving averages and all the averages are in an uptrend. Its price relative strength line is also at a new high.

Currently, it is 7 per cent above the 50 DMA and 13 per cent above the 200 DMA. The 20-period relative strength index is in a strong bullish zone and above the prior highs. The MACD is showing strong momentum. The trend strength indicator ADX (24.97) is also showing a solid strength in the trend. Its RRG RS and momentum are above 103, which show that the stock is in the leading quadrant. The KST is also in a strong bullish zone. In a nutshell, the stock has just broken out of a bullish pattern. Buy this stock above ₹1,190. Maintain a stop loss at ₹1,140. The target is ₹1,380 in the short to medium term.

DEEPAK FERTILISERS & PETRO. CORP. LTD. .............. BUY .......... CMP ₹965.70

BSE Code : 500645
Target 1 ..... ₹1020 
Target 2 .... ₹1145 
Stoploss....₹920 (CLS)
 

Deepak Fertilisers and Petrochemicals Corporation Ltd. (DFPCL) is among India’s leading producers of fertilisers and industrial chemicals. Set up in 1979 as an ammonia manufacturer, it is a multi-product Indian conglomerate with an annual turnover of over USD 1 billion with a product portfolio spanning industrial chemicals, bulk and speciality fertilisers, farming diagnostics and solutions, technical ammonium nitrate and value-added real estate, which includes India’s first and largest revolutionary concept retail destination for home interiors and design. 

Technically, the stock has broken above the seven-week tight range. The volume has been increasing for the past five weeks. Its relative price strength line is also at a new high. It is trading above the key moving averages and all its moving averages are in an uptrend. Currently, it is 8.44 per cent above the 50 DMA and 46.5 per cent above the 200 DMA. The weekly 20-period RSI is in a strong bullish zone. The MACD is in strong momentum. The Elder impulse system has formed a strong bullish bar on a weekly chart. The RRG RS is very strong at 119. In short, the stock has broken the bullish pattern. A move above ₹965 is positive and it can test ₹1,020 in the short term and ₹1,145 in the medium term. A stoploss can be placed at ₹920.