NIFTY Index Chart Analysis

Given the increasing volatility, Nifty registered a fall for the second consecutive week. During last week it traded in a 680 points range and ended with a loss of 1.80 per cent. It broke all the meaningful supports and traded below all long-term moving averages, including the 50-week average. The index failed to close above the previous week’s high since its December high. During the last 15-week downtrend, the declines were more impulsive and the counter-trends have been shallower. It is moving in a perfect downward-sloping channel. Technically, the price structure has been damaged as the index tested the 100-week moving average (17,051) too. 

The 50-week average (17,339) and the sloping trend line, drawn from December 2022 high, have become resistances for now. For a positive bias on the upside direction, the index has to close above the level of 17,339 and the prior week’s high of 17,530. This looks like a Herculean task for now. In the earlier cases, the index failed to close above the decline week’s high. Any counter-trend consolidation could be in the form of an inside bar next week, which is on the most optimistic note. Based on pattern analysis, it has been observed that the rising wedge breakdown target was partially achieved by 50 per cent during the previous week

This achievement coincided with the 13th week, which is a Fibonacci number, of the 26-week-long wedge pattern. Both the price and time targets were matched precisely, and it is anticipated that the pattern target (around 15,700) will be reached in the next 8-10 weeks. Nifty experienced a correction of 10.79 per cent from the high of 18,887.60 and the last significant visible support is located at the prior major swing low of 16,747. If there is a rebound from this level, it may reach the level of 17,817 (50 per cent retracement) or 18,070 (61.8 per cent retracement). However, if the rebound fails and the price continues to fall, then the next pattern could be alarming.

In such a scenario, the 16,747 zone would be considered as the neckline and the 18,070 zone would be the right shoulder, with the left shoulder already established. This forecast is the most concerning and potentially frightening. Historical data shows that when Nifty has risen 100 per cent from the bottom, it has generally corrected by more than 25 per cent from the top. This correction occurred in 2002, 2004, 2006, 2010, 2016, and more significantly in 2008 and 2020. However, the current rise from the low in March 2020 is an unprecedented 148 per cent. Despite the unexpected rally from September 2022 to December 2022, the prior major correction from the 148 per cent rise was only 18 per cent, which is lower than the historical average of 25 per cent.

Considering the many negative global developments such as the collapse of Silicon Valley Bank (SVB) and other banks, as well as the possibility of a global recession, there is a chance that the head and shoulders pattern may become a reality. It’s possible that the head and shoulder pattern will occur, and in the next 8-13 weeks, the pattern target could be at 14,600 levels with a 25 per cent correction target around 14,166. Historical data shows that major corrections usually last eight or 13 months (Fibonacci numbers), and the current correction is only four months old. So, we may expect the correction to continue for another 4-9 months.

Technical analysis indicates that Nifty is in a critical situation with the weekly RSI about to enter the bearish zone, the MACD already bearish and Nifty trading below Daryl Guppy’s moving averages. However, on the daily chart, Nifty closed above the prior day’s high, formed two doji candles at the bottom, and has a positive divergence on the RSI. If Thursday’s low of 16,850 is protected, Nifty may test the 17,212 and 17,325 zones with 17,451 being a key resistance. On the downside, the 16,747-16,677 zone is crucial lifeline support. It’s best to trade with small position size and less leverage.

STOCK RECOMMENDATIONS

GMR AIRPORTS INFRASTRUCTURE LTD. ........... BUY ........... CMP ₹42.68

BSE Code: 532754
Target 1 .... ₹50 
Target 2 ..... ₹57 
Stoploss....₹38 (CLS)

One of the largest private airport infrastructure development companies in India, GMR Airports Infrastructure is the only Indian company to develop airports outside India also. It is a leading global infrastructure conglomerate with expertise in designing, building and operating airports. It also has a significant presence in energy, transportation and urban infrastructure development. The company is the largest private airport operator in Asia and the second-largest in the world with a passenger handling capacity of over 189 million annually. Technically, the stock has closed at the resistance line. It has been consolidating for the last 61 weeks. This Stage 1 consolidation is in the mature stage. The stock is trading above all key long-term and short-term averages. The 40-week average is acting as a support. It has formed higher lows and higher highs. The prior swing high is at ₹44.30 and it is trading at 13 per cent to the consolidation range pivot. Currently, it is 48.77 per cent above the 200 DMA and 13.68 per cent above the 50 DMA. Its Relative Strength (RS) rating line is at a new high, showing an outperformance compared to the broader market. The RS and momentum lines are above the 100 zone in the RRG charts and show that the stock is in the leading quadrant. The weekly Elder Impulse System has formed a strong bullish bar. It is also above the Ichimoku cloud, which is bullish. The weekly MACD has given a fresh buy signal above the zero line. The RSI is near the strong bullish zone and above the prior swing highs. In short, the stock is about to register a bullish breakout. Buy this stock above ₹43. Maintain a stop loss at ₹38. The short-term target is at ₹50. Above ₹50, continue with a trailing stop loss for a target of ₹57.
 

APL APOLLO TUBES LTD. ..................... BUY ................... CMP ₹1,238.65

BSE Code : 533758
Target 1 ..... ₹1,500 
Target 2 .... ₹1,600 
Stoploss....₹1,162(CLS)

The company is the largest producer of structural steel tubes in India. It has the capacity to produce 2.6 million tonnes per annum and has a pan-India presence along with a footprint in 20 countries worldwide. It offers 1,100 varieties of pre-galvanised tubes, structural steel tubes, galvanised tubes, MS black pipes and hollow sections. It has a wide network with branch offices in 29 cities in India with 800 dealers. The company’s mission is to lead the process of transformation of commodity to value-added products through innovation and technology. Technically, the stock has broken out of a bullish flag pattern on a daily chart. It is trading at just 6 per cent to the prior pivot. It is above all the key moving averages. Last week, it recorded above average volume, showing increased buying interest. Currently, it is 5.45 per cent above the 50 DMA and 17.92 per cent above the 200 DMA. The stock has been making higher highs and higher lows since March 2020 lows and has not broken the previous swing low. The weekly RSI is in a squeeze in the neutral zone and near the strong bullish zone. The weekly MACD line is above the signal line and above the zero line. The Elder Impulse System has formed a strong bullish bar. Its Relative Strength (RS) rating line is at a new high, showing an outperformance compared to the broader market. The stock meets all the CANSLIM investing characteristics. Trading above the Ichimoku cloud is a bullish signal. In short, the stock has broken out of a counter-trend consolidation pattern with an above average volume. Buy this stock above the range of ₹1,200-1,275. Maintain a stop loss at ₹1,162. The medium-term target is ₹1,500.

(Closing price as of Mar 17, 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.