NIFTY Index Chart Analysis

The benchmark index Nifty has been in a consolidation mode for the second consecutive week, trading in a narrow range. This phenomenon is common after a massive move during the election results’ week. The index makes new highs without any confident moves. During the week, it made three new all-time highs in four trading sessions. The interesting fact is that for the last 10 days, Nifty has been closing below the opening level. In a narrow-range week, volatility has also not changed much. The index is up by just 2.79 per cent. Surprisingly, Nifty has formed a bullish candle after nine days, but with low volumes. 

Nifty’s chart is showing several bearish signals, indicating a potential downturn. It has formed a spinning top with a higher volume than the previous week. On the daily chart, a bearish engulfing candle with high volume has formed in the last 10 days. Nifty has also registered its first distribution day, a clear sign of trend fatigue. This is further evidenced by the series of bearish, indecisive candles it has formed. Importantly, on Friday, 95 per cent of the sector indices closed negative, and the market breadth is also negative.

Nifty has gained 4.82 per cent since April 1 in the current financial year. The Mid-Cap and Small-Cap indices are up by 16.18 per cent and 20.50 per cent, respectively. Even in the last 12 months, the mid-cap index has been up by 36 per cent and the small-cap index rallied by 81.08 per cent. Nifty is up by just 27.60 per cent in the last 12 months. When the benchmark is lagging, and the small-cap and mid-caps are running to new highs, it is a sign of a bubble or an indication that the uptrend is at a mature stage.

Nifty tested the 8 EMA support on Friday after two weeks. The MACD has been showing a clear sign of waning momentum. The RSI has been flat since June 7, hovering around the zone of 59-63. The ADX line is declining and the +DMI and –DMI are also declining. These are indications of exhaustion. On an hourly chart, the RSI almost got a confirmation for its bearish divergence. The MACD line is near the zero line, and the hourly bar is just moving the average ribbon’s lower line. The last week’s four trading sessions’ price pattern resembles a box range and it is trying to move higher.

A lot of indecisiveness spells major discomfort and a lack of confidence to take long positions aggressively. As stated earlier, the upside target is 23,770, which is very limited from the current levels. In these conditions, it is better not to chase the upside moves. A decisive, strong bullish bar above Friday’s high of 23,667 with higher volume will provide the confidence to take bullish bets. In any case, a close below the prior day’s low will be negative, and the index can test 20 DMA of 23,090 in the near term, which can be treated as a mean reversion. Below 20 DMA, the 50 DMA support is at 22,682.

As the upside is limited, protecting the profits on the table with strict stop losses is better. The stock-specific activity will continue. We may see a spike in volatility during the week as the monthly expiry is scheduled. At the same time, the Union Budget is just a month away, and the market is keenly watching developments and consultations. There may be sector rotation. Watch the money flow. Focus on the public sector enterprises and PSU banks as well as the infrastructure and pharmaceutical sectors. The IT sector is showing improved relative strength.

STOCK RECOMMENDATIONS

GABRIEL INDIA ................................. BUY ......................... CMP ₹477.05
BSE Code : 505714
Target 1 .... ₹515
Target 2 ..... ₹540 
Stoploss....₹400 (CLS)

The company manufactures a wide range of ride-control products, including shock absorbers, struts and front forks. It has established a significant presence across all the automotive customer segments, including OEMs, aftermarkets and exports with the production of over 500 models of ride-control products. The company began manufacturing shock absorbers and front forks in 1990. It is among the top three players in the two-wheeler and a leader in the three-wheeler segment. In the passenger cars segment, the company is one of the preferred sources of struts and shock absorbers for most automotive OEMs. The stock has formed a 29-week cup pattern, which is a counter-trend consolidation after a 243 per cent rally in just 36 weeks. During the previous three weeks, the volumes were recorded above average. It is just 2 per cent from an all-time high and is trading above all the moving averages. The 50 DMA is above the 200 DMA, which is a positive sign. The stock is trading 17.05 per cent above the 40-week average and 12.37 per cent above the 10-week average. Its relative strength is fair at 74. The weekly MACD has been showing a bullish momentum. The RSI is in a strong bullish zone while the KST has given a fresh bullish signal. The Stochastic RSI has been in a bullish zone. The Elder impulse system has formed a strong bullish bar. The +DMI is above the –DMI, which is a positive sign. The institutions have increased their stake by 1.15 per cent in the last reporting quarter. In short, the stock is ready to register a bullish breakout. Buy this stock above ₹445. Maintain stop loss at ₹400. The short-term to medium-term target is placed at ₹515 and ₹540.

FINEOTEX CHEMICAL LTD. ................... BUY ..................... CMP ₹388.90
BSE Code : 533333
Target 1 ..... ₹458
Target 2 .... ₹474 
Stoploss....₹353 (CLS)

Fineotex Chemical Limited manufactures over 450 specialty chemicals and enzymes. Its state-of-the-art plants in Navi Mumbai (India) and Selangor (Malaysia) are versatile across the product range. A new plant in Ambernath near Mumbai will boost capacities to 104,000 MT per annum, serving key international textile hubs. The company’s Malaysian subsidiary, Biotex, leads research and development, ensuring continuous evolution. Biotex specialises in high-end specialty finishing textile chemicals like water and oil repellents and antimicrobials and has a strong presence in the paint sector. A joint venture with Health Guard will expand geographic reach and offer durable antimicrobial and antiviral sustainable chemistries. The stock has been trading in a broad range over the last three months, and currently is on the verge of breaking out of the range. The stock is trading above all its key moving averages like the 20, 50 and 200 DMA. The stock is comfortably placed above its key moving averages – around 7 per cent from its 50 DMA and 11 per cent from its 200 DMA. It is currently forming a base in its weekly chart and trading around 4 per cent away from the crucial pivot point. The buyer demand is at B+, which is evident from the recent demand for the stock. The 14-period daily RSI is above the 60 mark and the daily MACD is pointing northward while sustaining above its nine-period average, thus validating the positive bias in the stock. Considering the above factors, the stock can be bought above the level of ₹405 for a short-term to medium-term target of ₹458-474 and stop loss should be maintained at the level of ₹353.

*LEGEND:  ◼ EMA - Exponential Moving Average.  ◼ MACD - Moving Average Convergence Divergence  ◼ RMI - Relative Momentum Index  ◼  ROC - Rate of Change  ◼ RSI - Relative Strength Index

(Closing price as of June 25, 2024)

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.