Nifty trend and stocks in action on Monday

Someone once asked Paul Tudor Jones, one of the greatest traders of all time and a money manager, as to how he determines a trend? He replied, “My metric for everything I look at is the 200-day moving average of closing prices.”

Nevertheless, the 200-DMA is a great defensive tool to know when to get out of a position. It is also the last line of defense in an uptrend before the probabilities shift to a downtrend beginning.

Yes, 200-DMA proved to be the last line of defense for Nifty as the bounce back started off from 200-DMA and the bulls never looked back as it raced to reclaim its important psychological mark of 11,400. For the week gone by, Nifty recorded gains of 3.32 per cent and this was the best week in percentage terms after the first week of June 2020. Moreover, such was the command of the bulls on D-Street that apart from one session, which was almost flat, all other sessions ended in the green.

So what changed all of a sudden that caused a shift in the tide in a jiffy? Well, the incoming data is pointing to a green shoot of economic recovery as GST posted growth in September after six months of contraction. Besides, the manufacturing PMI reached its highest mark since January 2012, and auto sales figures for the month of September drum up further confidence. Also, there is an assumption that the domestic institution led buying at the dusk of September month, which is a quarterly closing to prop up their NAV. It was evident from the net purchases by DIIs as in the last week of September, there was good participation from DIIs which consequently, turned net buyers during the previous month, after two consecutive months of sell-off.

On the daily timeframe, Nifty formed a bullish candle with a gap-up and also, resulted in the back-to-back opening upside gaps as on September 28 and October 1, which is positive for the index. Further, Nifty has managed to close above its 20 and 50-DMA, which is adding further to the bullish chorus. On the weekly timeframe, it had formed a bullish Harami pattern, which is a bullish reversal pattern. Hence, all the above factors indicate that the current pullback rally may extend. However, the big question here is: How much would it extend?

Technically, the index has retraced almost 78.6 per cent of its recent fall from the level of 11,618-10,790. So, the next retracement level, which is 88.6 per cent, stands near to 11,520 levels. Also, there is a trendline resistance that is placed around 11,470 levels. Hence, the level of 11,470-11,550 is a resistance zone for the index. Further, the current swing is five days old and we need to wait and watch, whether this swing will go beyond six days or would end around the resistance area of 11,470-11,550.

Hence, the level of 11,480-11,550 is a key resistance area in the near term and if the index resists around these level and start moving lower, then, in that case, the formation of the lower top would come into play. The first top of 11,794, which was registered on August 31, was followed by a lower top formation of September 16 and if the index takes a U-turn around the zone of 11,480-11,550, then it would be a lower top formation. Hence, until and unless the index does not move above the recent swing high of 11,618, the life for the bulls would not be easy.

On the downside, immediate support is seen in the band of 11,295-11,347, and as long as the index trades above this band, be with a bullish bias with an upside target of 11,470-11,550.

Marksans Pharma: The company is voluntarily expanding its earlier initiated recall on June 05, to include additional 76 additional unexpired lots of Metformin Hydrochloride extended-release tablets, USP 500 mg & 750 mg as it has been observed that NDMA content in some lots exceeded the acceptable daily intake limit (ADI) of 96ng/day. Therefore, out of an abundance of caution, additional 76 lots are being recalled.

LTTS: LTTS announces the completion of Orchestra Technology acquisition.

Dr Reddy’s: Dr Reddy's Laboratories announces the launch of a generic version of Sapropterin Dihydrochloride tablets for oral use in the US market.

Route Mobile: Route Mobile acquires key technologies and its related contracts on a slump sale basis from TeleDNA, a company specialising in the development of telecom related solutions like multimedia messaging service centre (MMSC), short message service centre platforms (SMSC), SMS HUB and SMS firewall, headquartered in Bengaluru.

Reliance Industries: Reliance Industries and Reliance Retail Ventures Limited (RRVL) announced that a global investment firm, TPG will invest Rs 1,837.5 crore into RRVL, a subsidiary of Reliance Industries.

Hindalco Industries: Novelis (a subsidiary of Hindalco Industries) closes the sale of former Aleris Plant in Duffel (Belgium).

Mahindra & Mahindra: Mahindra commemorates its 75th anniversary by launching all-new Thar.

ITI: ITI Limited signs contract with Defence Ministry to implement Rs 7,796 crore ASCON Phase-IV project.