NIFTY Index Chart Analysis

The Nifty is at a new lifetime high. With this, the Nifty ended its 13-month-long counter-trend. After six days of tight-range consolidation, the breakout registered a strong volume on Thursday. On Friday, though, we saw a retest of the breakout and thereafter a sharp bounce to mark a fresh all-time high on Monday. On a weekly chart, it had formed a sizeable bullish candle and with this we saw a higher high formation for the sixth week in a row. In continuation of the trend, this sizeable bullish candle provides a clue for further upside. Though it formed a hanging man candle on the daily chart on Friday, it may not be a worry point for now as it was negated in the very next trading session.  

The Nifty is still above the breakout level, and there is no confirmed weakness in any of the timeframes. All the short, medium and long moving averages are in the uptrend. Last Monday, the index registered a distribution day, and the bears failed to violate the key support. From Tuesday onwards, the index made higher high candles and cleared the indecisive moves with a strong breakout. It almost tested the 20 DMA and 21 EMA and bounced. Now the support has moved higher to the level of 18,258. Currently, the Nifty is trading 4.70 percent above the 50 DMA.

As we expected last week, the index tested the 61.8 per cent extension of the prior swing. Next, if it closes above the level of 18,548 for two days, we can expect it touch the levels of 18,780 followed by 19,034 and 19,180 in the short to medium term. The final pattern target is placed at 19,660. On the downside, if the index closes below 18,258 (20 DMA), we may get the first signs of weakness. The recent base low of 18,114 is also a strong support. Only below this level can we expect a reversal sign. The leading RSI indicator has broken out of a flag pattern and it given strong uptrend possibilities.

If the RSI closes above 69-70, the Nifty will test the level of 18,780 immediately. In the current structure, the RSI can test the 83-84 level. The daily MACD line is about to move above the signal line for a fresh bullish signal. The ADX is also near a strong bullish zone. Bank Nifty and PSU Bank indices are also stronger as Bank Nifty is at a new high, led by the rally in PSU banks. Bank Nifty is losing momentum and is near the weakening quadrant in the RRG charts. The PSU Bank index formed a bearish shooting star candle on Friday, which may lead to consolidation from now.

If this happens, the Nifty may face resistance around 18,780. Despite the fact that D-Street is in a celebration mode, there are some concerns one should not ignore. The advance-decline ratio is not so great in this phase. On Monday, as the Nifty scaled to a fresh all-time high, the index breadth was not at its best. The RRG momentum is still oscillating around the zone of 100. The VIX is at the lowest level, which has an inverse relationship. Generally, when VIX reaches the lowest levels, the benchmark index forms a top. This is one of the reasons which make us cautious. Before March 2020 we had seen the sharpest fall in the VIX when it was almost at the current level.

All the major declines in the market have happened when the VIX has touched its lowest levels, including the 2008 historical bear market. Since October 2021 the foreign exchange reserves have been depleting. The rupee depreciation is at a record level. The DXY formed a base during last week with a positive divergence. Generally, December is the month of NAV management and FIIs investment rejigs. Most of the market tops were formed in the month of January. This means that though the market is at a new high, caution is advisable. Till then, be with the trend. As stated above, the 20 DMA and the recent base low are the immediate supports for the index.

STOCK RECOMMENDATIONS

REDINGTON LIMITED ............................ BUY ..................... CMP ₹183.65
BSE Code : 532805
Target 1 .... ₹207 
Target 2 ..... ₹258 
Stoploss....₹162(CLS)

The company is engaged in new-age technologies like artificial intelligence (AI), robotics, big data and analytics, the Internet of Things (IoT) and 5G communications that are opening new possibilities and opportunities. It has a presence in 38 global markets and is the distributor of an entire gamut of IT products, smart phones, solar products, etc. It also provides services like cloud management, logistics, BPM, BPO and 3D printing services. With over 290 brand associations, it services more than 43,000 channel partners. Technically, the stock is trading at a new lifetime high. It has broken out of a Stage 1, 70-week consolidation base. For the last two weeks, volumes have been recorded above average. Its relative strength line is at a new high and this shows outperformance as compared to the broader market. It is 22.74 per cent above the 50 DMA and 30.72 per cent above the 200 DMA. All the short-term and long-term averages are in an uptrend. After breaking out of the base, it is trading just 3 per cent above the pivot point, which is the ideal buying range for a stock. The 20-period RSI is in a strong bullish zone. The weekly MACD shows strong bullish momentum. As the stock is at a new high, it has cleared all the resistances. The Elder Impulse System has formed three consecutive weekly bullish bars. The RRG RS and momentum are above 100, and the stock is in the leading quadrant. The ADX (25.10) shows solid strength in the trend. It is also meeting Guppy’s multiple moving averages trend setup. In short, the stock has broken out of a 70-week, Stage 1 base. A move above ₹180 is positive and it can test ₹207 in the short term. Maintain stop loss at ₹162. The medium to long-term target is ₹258.

APOLLO TYRES LTD. .......................... BUY ......................... CMP ₹313.05
BSE Code : 500877
Target 1 ..... ₹341 
Target 2 .... ₹405 
Stoploss....₹282 (CLS)

The company is a leading tyre manufacturer with a presence in over 100 countries. It has seven manufacturing locations in India and Europe and two global research and development centres. The company markets its products under its two global brands, Apollo and Vredestein. It is ready to exploit opportunities arising out of the electric vehicle (EV) boom. The company is leveraging advanced technologies like foam technology and sealants for EV tyres. It is also working on improvements in rolling resistance and noise reduction to support the development of EV tyres. These new technology tyres will be exported to Europe in December. The market for these tyres may be huge in the next two-three years. The stock closed at a new all-time high and broke out of a 10-week cup and handle pattern with higher volume. Before the pattern formation, it registered a one-year consolidation breakout. Its relative strength line is at a new high. It is trading 38 per cent above the 200 DMA and 10.17 per cent above the 50 DMA. All the shortterm and long-term moving averages are in the uptrend. The ADX (28.81) shows strong trend strength. The 20-period RSI is in a strong bullish zone. The Elder Impulse System has formed a strong bullish bar. The KST and the TSI indicators are also in the bullish setup. In short, the stock has registered a strong bullish breakout. The stock is still in the ideal buying range after the breakout. Accumulate this stock above ₹306. Maintain stop loss at ₹282. The short-term target is ₹341. The medium to long-term target is at ₹405.

*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., 28, 2022)