Index trend and stocks in action October 25, 2019
Volatility was the hallmark of Thursday’s sessions on D-Street, as Nifty moved in both directions and ultimately ended the session in the red below the important psychological 11,600 mark. On Thursday, the benchmark index moved in a range of about 145 points, which resulted in the formation of widespread bar 4 (WS4). A WS4 forms when a price bar’s range is wider than the previous 3 bars’ ranges. On the daily time scale, a bearish engulfing-like candlestick pattern has formed, although not a perfect textbook one. Further, Nifty added a distribution day on Thursday, taking the total count to two in the last four trading sessions. Also, after many days, the market breadth deteriorated and most of the sectoral indices closed with losses.
Technically, Nifty formed a third lower low bar and registered the week’s lowest close. Also, after reaching its prior swing high of around 11,700 mark, the benchmark index is struggling to close above this resistance for the last three days. However, if we move one scale lower, that is, on the hourly chart, we see two patterns unfolding on this time frame. The first one is a bullish flag pattern and the index is trading near to the lower end of the pattern, at present. The second one is an ascending triangle pattern, where the breakout of this pattern is seen around the 11,720 mark. Thus, the vibes are mixed at the current juncture for the index. However, it seems that we are into a consolidation to minor corrective phase, as the index has managed to defend the 11,500-11,550 levels on closing basis and the last three sessions can be termed as a consolidation and profit booking phase, with the market witnessing a V-shaped recovery of over 600 points from the lows of October 9, in just 8 trading sessions. Meanwhile, the RSI is showing a negative divergence on the daily chart and the stochastic oscillator already turned down from an extremely high point. The %K is below the %D, which is indicating further weakness. Talking purely about the trading levels, the zone of 11,500-11,550 level is a crucial support area and the level of 11,700-11,720 is a resistance zone. A sustainable move on either side would lead to a trending move.
Overall, nifty has entered into a higher volatility environment as it has formed a WS4 bar, so the focus should be on the key/extreme levels because the minor levels are more likely to get crushed compared to previous times, when the market just handed out free lunches for trend traders, as it rose for 6 consecutive trading sessions. Nifty is expected to trade in the range of 11,500-11,720. However, we would reiterate that stock-specific action is likely to continue.
Tata Steel: Tata Steel clarified that its arm participated in the e-auction for tendering by the Odisha Government for the Misrilall Chrome Mine.
Power Grid: The Department of Public Enterprises (Ministry of Heavy Industries and Public Enterprises, Government of India) vide Office Memorandum, dated October 23, 2019, has conveyed grant of Maharatna status to the Power Grid Corporation of India.
Chalet Hotels: Chalet Hotels has issued Letters of Award for works contract, aggregating to Rs 319.5 crores to Larsen & Toubro for the construction of Hotel and Commercial Buildings in Powai, Mumbai.
Vodafone Idea: Vodafone Idea is extremely disappointed by the hon’ble Supreme Court's judgment on the Adjusted Gross Revenue (AGR) case. Clearly, this judgment has significantly damaging implications for India’s telecom industry, which is already reeling under huge financial stress and is left with only four operators.