NIFTY Index Chart Analysis

The previous week’s marginal breakout was confirmed with a decisive breakout during last week. It formed a strong bullish candle above the prior swing highs. The Nifty closed at a weekly high with the highest volume in the last two months. As the volume validates this breakout, it is better to avoid any bearish view. Currently, it is 3.78 per cent above the 10-weekly average (17,611) and 7.61 per cent above the 40-weekly average (17,009). The Nifty rallied 1,602 points or 9.57 per cent from the September 30 low. Also, after breaking out of a bullish flag pattern on October 24, the Nifty extended and achieved more than 50 per cent of the pattern target. 

The 61.8 per cent extension level is at the level of 18,548. With all probabilities, this is the near-term target. We need to watch the Nifty behaviour closely around this level. If the Nifty adds distribution days from here, the currently confirmed uptrend will be under pressure. As per the Dow Theory, the index has made higher highs and higher lows on daily and weekly timeframes and only in case of closing below the swing low (September 30 low) for a confirmed downtrend, which is almost 10 per cent below the current level. The Nifty ended its six days of indecisive and bearish moves by closing above the previous high. 

As the current swing is six weeks old, it may attract profit booking anytime now. Just on Friday, the index erased all the last week’s losses and sustained the momentum. Even with indecisive and wavering moving, the Nifty has not shown any weaker signs, which later proved our stance was right with a strong close. The recent dips failed to get bearish confirmations. Technically, the Nifty has reversed the 13-month-long bearish or countertrend. Historically, a majority of the bearish phases ended in 13 months. As long as the level of 17,611 is protected, the Nifty will be positive in the medium term. The recent low of 17,959 will act as short-term support.

Only below these levels, the market will turn weak. Otherwise, look for a target zone of 18,545 in the near term and for the long term the target would be around the level of 19,421. Interestingly, the leading indicator RSI has shifted its range into the strong bullish zone. This range shift is a strong bullish signal for the market. At the same time, in all timeframes, the RSI is above the 60 zone, which is another bullish sign. Its relative strength (RS) line is above its 50-week average and rising. Currently, 74 per cent of the Nifty 50 stocks are above the 200 DMA. But, in the broader market index, Nifty 500, only 57 per cent of the stocks are above the 200 DMA. 

The rupee appreciated during last week and supported the rally. The consistent positive inflow from the FPIs since last month also supported the market sentiment. Currently, the benchmark index is near the leading quadrant, as the RRG RS is at 100.60 and momentum is at 99.97 on the daily timeframe. That said, some factors signal caution. Fundamentally, the economies are not in as strong a position as the equity market is. Britain is already deep into recession officially. The US is almost there. Quantitative tightening programs are in place worldwide, including India. 

While on the one hand our economy is integrated with the global economy, on the other hand we also say we are insulated from global recession. This contradiction and the outperformance of our market is not convincing in the current situation. When our market topped in January 2020, the price earnings (PE) ratio was 28.67 and the price to book value ratio was 3.8. During February 2021, the PE was at 42. After many alterations and changes in calculation, the current PE is at 21.92 and PBV is at 4.31, which is a nearly 12-year high. The highest PBV is 4.63. Considering that the RSI has shifted the range into a strong bullish zone, the best way from here on is to monitor the distribution days and on the downside the level of 17,611 is the key level to watch as an important support.

KIRLOSKAR INDUSTRIES LTD. .................... BUY ............. CMP ₹2013.50

BSE Code : 500243
Target 1 : ₹2300 
Target 2 : ₹2450 
Stoploss : ₹1,860(CLS)

Kirloskar Industries is a holding company that has stakes in all the group companies with a majority share in Kirloskar Ferrous (50.93 per cent) and Avante Spaces Limited (100 per cent). The group has 133 years of rich history and has a presence in 30 countries. Over 50 per cent of India’s CNG stations are powered by Kirloskar Industries. Technically, the stock is trading at the seven-week flat base resistance. The prior pivot was at ₹1,940. Its relative strength line is near the high. The 10-week average acted as a support in the ongoing base formation. It is above all the key moving averages. The stock is trading 28.13 per cent above the 200 DMA and 10.95 per cent above the 50 DMA. All the moving averages are in an uptrend. It has also cleared the anchored VWAP. The RSI has shifted its range into a strongly bullish zone from a neutral zone. The daily MACD has given a fresh buy signal. The daily and weekly ADX are above the 40 zone, indicating solid trend strength. The Elder impulse system has formed a series of bullish bars. KST and the TSI are in a bullish set-up. In short, the stock is about to record a bullish breakout. Buy this stock above ₹1,920-1,940. Maintain stop loss at ₹1,860. The short to medium target is ₹2,300 followed by ₹2,450.

ALLCARGO LOGISTICS LTD. .................. BUY ................ CMP ₹466.00

BSE Code : 532749
Target 1 :  ₹543 
Target 2 : ₹622 
Stoploss : ₹422 (CLS)

Allcargo Logistics Limited, part of the Allcargo Group, is a global leader in multimodal logistics solutions. Allcargo Belgium NV is a global market leader in ocean freight consolidation while Allcargo Logistics in India is a market leader in the container freight station business. The company currently operates out of 300+ offices serving 180 countries. It recently acquired GATI and has thus become a leader in express logistics. Technically, the stock has broken out of a seven-week, stage 2 base. For the last two weeks, the stock has been registering above average volume. It registered a lifetime high closing and is trading 4 per cent above the prior pivot, which is in the ideal buying range. It is trading above all the key moving averages. It is 17.66 per cent above the 50 DMA and 39.21 per cent above the 200 DMA. It has cleared all the resistance and is trading at a new high. The 20 periods’ RSI is in a strong bullish zone on a weekly chart. The MACD shows solid momentum. The weekly ADX (39.44) shows solid trend strength. Its relative strength line is also at a new high, indicating outperformance compared to the broader market. The stock meets all the characteristics of the CANSLIM methodology of investing. It is also in the leading quadrant and indicates outperformance. In short, the stock has registered a bullish breakout with volume confirmation. Buy this stock above ₹470 and maintain stop loss at ₹422. The short-term target is ₹543 and the medium-term target is ₹622.

*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 Nov. 15, 2022)