NIFTY Index Chart Analysis

In a scenario of buoyant global markets, the Indian stock market negated all the weaknesses. The domestic equities suddenly turned bullish as many Large-Cap stocks registered monthly breakouts. The 81-day downtrend has retraced almost 61.8 per cent in just 21 days. As the retracement was in one-fourth time of the prior downtrend, it is generally a strong bullish sign. The benchmark Nifty closed above last month’s Doji candle high. It registered one of the best weekly gains last week. The previous week’s bearish engulfing candle failed to get a confirmation for its bearish implication. 

Nifty has tested and closed at the resistance level of the trend line drawn by connecting two major lows of March 2020 and June 2022. Now Nifty is at a 17-week high and above all its key moving averages. During the recent low, the 100-week moving average acted as support with just one week of whipsaw. Now the index is 2.37 per cent above the 200 DMA and 3.18 per cent above the 50 DMA. The market condition will change into a confirmed uptrend with renewed bullish strength if the 50 DMA closes above the 200 DMA (golden crossover).

A nine days’ rally from March 29 to April 13 witnessed a consolidation for five days in the previous week. It retested the channel support line on all five days and bounced back sharply. Last week’s rally extended by 50 per cent (18,028) of the previous nine-day swing. The 100 per cent time and price extension level stands at the level 18,503 and this could be achieved in the near to short term. Before achieving this level, the levels of 18,140 and 18,300 may act as resistances. Currently, the Nifty is 2.5 per cent above the 20 DMA and 3.18 per cent above the 50 DMA.

After December 14, 2022, the distance between 50 DMA and the index is at the highest level. Its maximum distance from the 50 DMA in recent times is 5.78 per cent. In this context, we can expect that the current rally may extend beyond the level of 18,140 and can achieve the target of 18,503. In our previous analysis, we mentioned that a right shoulder high could be formed at the level of 18,134 on a weekly chart. We are almost there now. A 2-5 per cent variation is acceptable in any kind of symmetry pattern. In the process of forming a right shoulder, an inverted head and shoulder pattern has emerged and registered a breakout last week on the daily chart. 

This inverted head and shoulders target is almost at the previous lifetime high. This target can be achieved in another two legs, one down and another one would be an up-move. Any correction should not retrace more than 38.2 per cent in the process of meeting the inverted head and shoulders pattern target. The daily RSI and MACD lines have reached the overbought condition after the December high. The weekly RSI at 56.29 is near a strong bullish zone. If the Nifty closes above the level of 18,300, it may shift the range into a strong bullish zone. For the near future, maintain a positive bias as long as it trades above the level of 17,858.

As stated above, the short-term and pattern targets are placed at the levels of 18,300 and 18,503. A close below the level of 17,885 will be a sign of weakness. A close below 17,790 is negative and it can test 20 DMA (17,623). Only below these levels the market will turn bearish. Till then, be with the trend. There are some historical concerns regarding the strong bullish bias. The India VIX, known as the fear index which gauges volatility, is at its lowest levels. It has registered the lowest monthly close since July 2010 at 10.92. The VIX’s lowest range is 8.75- 9.02. We can expect some more downside. 

This means less volatility and traders feel they are under-invested and taking more exposure to the equities in the process of fully investing. They feel a better risk-taking environment lies ahead. Once this happens, any small spike in volatility will hurt the uptrend. That spike in the VIX will lead to sharp profit-taking and the benchmark index will witness a sharp decline like a nose dive. All the market tops were made when the VIX was low. This inverse relationship should be kept in mind and don’t commit yourselves to aggressive long positions. It’s time to be cautiously optimistic for now

STOCK RECOMMENDATIONS

MTAR TECHNOLOGIES LTD. ................... BUY ................. CMP ₹1,814.80

BSE Code : 543270
Target 1 .... ₹2,044 
Target 2 ..... ₹2,260 
Stoploss....₹1,721 (CLS)

MTAR Technologies is a leading player in the precision engineering industry. It is engaged in manufacturing missioncritical precision components with close tolerances (5-10 microns) and in critical assemblies to serve projects of high national importance. The company’s board of directors has approved the establishment of in-house electronics manufacturing. It has initiated work on cable harness assemblies and can take up more projects related to electronics systems in the future. The company has signed a memorandum of understanding (MoU) with Indian National Space Promotion and Authorization Centre to design and develop a two-stage to low-earth orbit all-liquid small satellite launch vehicle. This will be powered by semi-cryogenic technology with a payload capacity of 500 kg. It has an order book of about ₹1,200 crore. Technically, the stock is trading at the 20-week, Stage 1B consolidation pivot level. Its price relative strength (RS) line is at a new high, indicating outperformance compared to the broader market. It closed above the 38.2 per cent retracement level of the prior downtrend. It is currently trading above the prior minor swing high. The stock is above all the key moving averages. It is 7.85 per cent above the 50 DMA and 13.86 per cent above the 200 DMA. Both the averages are in an uptrend. The weekly MACD has given a fresh buy signal and the RSI has shifted its range into a strong bullish zone. For the last two weeks, the volumes have been above average. It cleared the anchored VWAP resistance. The Elder Impulse System has formed a strong bullish bar. In short, the stock is trading at the pivot level in the ideal buying range. Buy this stock in the range of ₹1,795-1,825. Maintain stop loss at ₹1,721. The short-term target is ₹2,044 and in the medium term it can test ₹2,260.

HINDUSTAN AERONAUTICS LTD. ............. BUY ................ CMP ₹2,921.40

BSE Code : 541154
Target 1 ..... ₹3,300 
Target 2 .... ₹3,450 
Stoploss....₹2,750 (CLS)

A public sector Navaratna company, Hindustan Aeronautics Limited (HAL) is engaged in the design, development, manufacture, repair, overhaul, upgrade and servicing of a wide range of products, including aircraft, helicopters, aero-engines, avionics, accessories, aerospace structures and industrial marine gas turbines. The company supplies its products and provides services to the Indian defence forces and the Indian Coast Guard. It has been supporting the fleet of Indian defence for over five decades. It has 20 production divisions and ten research and development centres across India. It has successfully carried out the first flight of Hindustan 228 aircraft. It had an order book of ₹79,229 crore as of December 31, 2021. Technically, the stock has broken out of an eight-week consolidation with a higher volume. It is trading at a new lifetime high. The 10-week moving average acted as support during the consolidation. Currently, the stock is 8.14 per cent above the 50 DMA. Its relative strength (RS) line is also at 84, which shows outperformance compared to the broader market. From November 2020 the 20-period RSI has sustained above the 50 zone. After a small consolidation, the 14-period RSI has shifted its range into a strong bullish zone. The weekly MACD has given a fresh buy signal. A strong bullish bar has formed in the weekly Elder Impulse System. KST and the TSI have been in the bullish set-up. The weekly ADX shows strong trend strength. Institutional holding has gone up by 7.53 per cent and the number of institutions invested in the company increased to 414 in the last reported quarter, which is a positive sign. In short, the stock is trading at a new high and above the prior pivot level and it is in the ideal buying range. Buy this stock in the ₹2,915-3,000 zone. Maintain a stop loss at ₹2,750. The short to medium-term target is ₹3,300. In the medium term it can test ₹3,450.

(Closing price as of Apr 28, 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.