NIFTY Index Chart Analysis

After a volatile and eventful week, the market recovered at the weekend and closed positively. It is proven once again that the budget week is volatile. The Nifty traded in a 618 points range on the budget day and is still trading within that range. Except for five days, the last 37 days of price action are also limited to below 20 DMA. On the budget day, it almost moved close to the long-term average of 200 DMA. The 20-week average acted as resistance. Earlier, it acted as support during the four weeks of inside action. It is important to cross the 20-week average of 17,932 and a close above the previous week’s high of 17,972 is crucial for a bullish bias.

Interestingly, the Nifty retraced 61.8 per cent of the January 24-February 1 downswing, which is at 17,877. There is a confluence of resistances in the zone of 17,877 to 17,972. Unless it clears decisively, we cannot be aggressively bullish for now. For a strong bullish bias, Nifty has to close above 18,200, which is a prior minor swing high. The anchored VWAP resistance is also placed at the same level at 18,155. For the short term, the 17,898- 18,200 range is a crucial resistance zone. At the same time, the 17,353-17,302 zone will be of crucial support.

Nifty has already formed a series of lower highs and lower lows. It corrected 8.12 per cent from the all-time high. The current week’s price actions are not convincing enough to be bullish. Unless Nifty makes a swing high, the probability is higher that the market will test the 200 DMA support in the near term. The RSI is still below the 50 zone. However, the MACD histogram shows an improvement in bullish momentum because of the last four days of inside bar action. The daily Elder impulse system has formed neutral bars.

We can say that the probability of a downside is limited to 200 DMA support but the upside potential requires strong closings above the confluences of resistances. It is advised to keep the leveraged positions low. The market may see sideways action for the coming week as well before taking a directional bias. Nifty FMCG and IT indices are in a relatively better position in the current market. On the RRG charts, automotive and pharmaceutical indices are improving their relative strength and may take another two weeks to get into the leading quadrant. These two sectors are looking promising as their momentum and relative strength are stronger compared to the broader market.

Some of the leading stocks registered breakouts last week and some more are near to the Stage 1 flat base breakouts. Be positive about these two sectors. The Small-Cap 100 index faced strong resistance at the double top’s valley point. It is trading on the 40-week average support. The Mid-Cap 100 index is also on the support of 40-week average and tested at least four times in the last two months. The current pattern looks like a rectangle at the top. The broader market breadth has been negative of late. FIIs have been selling aggressively for the last two months. The market is lacking leadership from the stocks as well from the sectors as of now

It requires a big push in the sentiment and decisive leadership to find its mojo again. Historically, the pregeneral elections calendar year is bullish. In 2002, Nifty rallied 72 per cent and that was the best of all. But, small-cap and mid-cap indices generally underperformed. The IT sector outperforms compared to all the sectors. Even this time also, the IT index is showing high relative strength and momentum. Hence, it’s time to be stock-specific unless we see a decisive breaking out of the cluster of resistance on the upside.

STOCK RECOMMENDATIONS

ACTION CONSTRUCTION EQUIPMENT ............ BUY ........... CMP ₹361.60
BSE Code : 532762
Target 1 .... ₹410 
Target 2 ..... ₹440 
Stoploss....₹320 (CLS)

Action Construction Equipment (ACE) is India’s leading material handling and construction equipment manufacturing company. Its portfolio includes all types of cranes, lorry loaders, backhoe loaders, vibratory rollers, forklifts, tractors and harvesters and other construction equipment. ACE has a consolidated presence in all major infrastructure, construction, heavy engineering and industrial projects across the country and is a leader in mobile cranes and tower cranes segment. Technically, the stock has broken out of its 10-week consolidation with massive volume. It closed at a new high with its relative strength line also at a new high. The 10-week average acted as major support during the consolidation. Currently, it is 12.32 per cent above the 10-week average and 22.35 per cent above the 30-week average. The weekly MACD has given a fresh buy signal and the RSI has entered into a strong bullish zone. The Elder impulse system has formed strong bullish bars. The Chande Trend Meter shows the stock is in a strong uptrend. The ADX (29.84) shows solid trend strength. It is also meeting all the CANSLIM investing characteristics. The stock has an EPS rank of 95, which is a great score indicating consistency in earnings. An RS rating of 83, which is good, indicates outperformance as compared to other stocks. The master score of B is close to being the best. Overall, the stock has great fundamentals and technical strength to stay in momentum. Accumulate this stock in the ₹355-365 zone. Maintain stop loss at ₹320. The short-term target is ₹410 and the medium-term target is ₹440

BRITANNIA INDUSTRIES LTD. ................. BUY ................ CMP ₹4605.35
BSE Code : 500825
Target 1 ..... ₹5,100 
Target 2 .... ₹5,250 
Stoploss....₹4,205(CLS)

Britannia Industries is India’s leading FMCG company and has over a century of history. It manufactures Good Day, Tiger, Nutri Choice, Milk Bikis and Marie Gold brands of biscuits. The company’s portfolio includes biscuits, breads, cakes, rusk and dairy products, including cheese, beverages, milk and yogurt. Britannia Industries’ products are available across India, reaching 50 per cent of the households. The dairy business contributes 5 per cent of the revenue. It launched five new products in the last quarter. It entered into a strategic partnership with a joint venture with BEL, France, to launch innovative cheese products. The stock closed at a new lifetime high. It broke the Stage 1 flat base with a massive volume. Except that during March 2020 it never made a lower low on a longer-term chart. The price relative strength line is also at a new high, showing outperformance compared to the broader market. The 10-week average acted as support during the base formation. Before the flat base formation, the stock broke the 60-week cup and handle pattern and it met over 60 per cent of the pattern. Now, after a decent consolidation, it is ready for another leg of the rally. The 30-week and the 50-week averages are in an uptrend. The MACD shows increased bullish momentum. The 20-period RSI is in a strong bullish zone. It moved in a staircase manner. The Elder impulse system has formed a strong bullish bar. The RRG chart shows that the stock in a leading quadrant as the relative strength and momentum are in the above 100 zone. It is also meeting all the CANSLIM characteristics of investing. Accumulate this stock in the ₹4,537-4,665 zone during every dip. Maintain stop loss at ₹4,205. The short-term target is at ₹5,100 and the medium-term target is at ₹5,250.

(Closing price as of Feb, 07, 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.