NIFTY Index Chart Analysis

NIFTY IN AN UPBEAT MOOD

Over the past fortnight, the relentless march of benchmark index Nifty 50 off its 200 DMA surpassed yet another barrier i.e. the peak of February 2022 (17,795).Following Friday’s uptrend, Nifty 50 continued its upward march on Monday to surpass its important psychological mark of 18,000. It registered an intra-day high of 18,114.65 before settling at the level of 18,053. On Monday, on the daily chart there was an appearance of another bullish candle, indicating extension of the recent rally. However, on Tuesday the bears paid a surprise visit as Nifty snapped its threeday winning streak with the emergence of profit booking. 

It ended the day below the 18,000 mark. On Tuesday, the Nifty formed a bearish candle on the daily chart besides the long bull candle of Monday. This indicates profit booking in the index from the highs. Though we have observed the formation of a bearish candle on the daily chart, it has not damaged the recent uptrend status of the market as Tuesday’s formation in technical parlance is said to be an inside bar formation with the price trading within the high and low of the previous trading session.

Pattern analysis shows that Nifty has taken out the resistance at 17,450. With this it has also seen a shift of range on the upside with immediate support now seen near the zone of 17,450-17,500. Meanwhile, on the upside, immediate resistance for the Nifty is placed in the region of 18,100- 18,150 and this resistance zone is defined by a falling supply line joining major swing highs. So, as long as the index trades below this point, it may remain under range consolidation. Currently, the index is trading above the key moving averages of 20, 50, 100 and 200 DMA.

What is interesting to note is that currently the Nifty is trading higher by 4.7 per cent from its 20-DMA. Historically speaking, it has been seen that anytime the index trades higher by 4.0-5.5 per cent from its 20 DMA, it displays a tendency to revert to the mean. So, reverting to mean does not mean that a correction is in the offing. The index might stay sideways and the 20 DMA may shift higher. Hence, this supports the above thesis that we anticipate the index to be under range consolidation. Talking about the oscillators, the 14-period RSI on the daily chart is at 65. The daily MACD is bullish and remains above the signal line.

The stochastic oscillator is in an overbought condition. Interestingly, the buoyancy in the last fortnight is supported broader market participants and testament of this is the fact that Nifty mid-caps has jumped over 7 per cent while the Nifty Small-Cap index has rallied over 5 per cent in the last fortnight. Overall, the formation of higher peak and trough on the Nifty 50 index supported by broad market participation signifies improving price structure that makes us believe Nifty would endure its northbound journey and will head towards the level of 18,350, which is January 2022 high followed by the all-time high level of 18,604 in the medium term.

A key point to highlight here is that over the past 19 trading sessions the index has retraced more than 88 per cent of 33 sessions’ decline. Thus, the faster pace of retracement would be the key factor to monitor in the coming weeks that would confirm structural improvement. A preferred strategy for the traders would be to buy on dips. Though we anticipate some range consolidation in the frontline index, we believe there will be no shortage of trading opportunities as stock-specific action would continue. Going ahead, the key events that need monitoring for a grip on the trend of the market would be the Reserve Bank of India’s monetary policy review outcome, macroeconomic data, Q4 results season, international crude oil prices, developments on the RussiaUkraine front and FIIs fund flow.

STOCK RECOMMENDATIONS

TAMIL NADU NEWSPRINT AND PAPERS LTD. .................. BUY .......... CMP ₹ 195.20

BSE Code : 531426  
Target 1 : ₹ 216  
Target 2 : ₹ 230
 Stoploss:₹ 175 (CLS)

Tamil Nadu Newsprint and Papers Limited (TNPL) heralded its journey in the paper industry in the early eighties with a view to utilise the bagasse – sugarcane residue available in sugar mills – as a primary raw material. Today, TNPL is an acknowledged leader in the technology of production of paper from bagasse. It is the most environmentally conscious and eco-friendly mill in the country with least water consumption. Technically, the stock has witnessed breakout of Stage 1 cup-like pattern on the weekly chart. The length of the cup is about 40 weeks’ long and the depth of the cup pattern is 38.5 per cent. Interestingly, the breakout in the stock was supported by strong volumes. Volumes for the day were above the 50 days’ average volume at 5.41 lakhs while Tuesday’s volume was over six times its 50 days’ average volume. The stock registered a fresh 52-week high on Tuesday, trading near its 52-week high. It is trading above all the short and long-term moving averages and above the 20, 50, 100 and 200 DMA average, all of which are trending upwards. Daryl Guppy’s multiple moving averages suggests bullish strength in the stock. This set-up is giving a clear uptrend picture in the stock. The leading indicator of 14-period daily RSI is in a super bullish zone and has given bullish crossover on Monday. The stock’s trend strength is extremely high. The Average Directional Index (ADX), which shows trend strength, is as high as 47.66 on the daily chart. As such, we expect the stock to continue its upward movement and test levels of ₹ 216, followed by ₹ 230 in the short to medium term. While on the downside, maintain ₹ 175 as stop loss.

BIRLASOFT LIMITED ........................... BUY ...................... CMP ₹ 489.55

BSE Code : 532400
Target 1 : ₹ 532
Target 2 : ₹ 553
Stoploss:₹ 449 (CLS)

As a part of the multibillion-dollar diversified C K Birla Group, Birlasoft Limited with its 11,900+ professionals is committed to continuing the group’s 160-year heritage of building sustainable communities. Birlasoft is a technology company engaged in computer programming, consultancy and related activities. The stock has registered a breakout of neckline of the inverted head and shoulder-like pattern on the daily chart. Interestingly, the breakout in the stock is accompanied by robust volumes of nearly two times of the 50 days’ average volume, indicating strong buying interest by market participants. The 50 days’ average volume was 28.84 lakhs while on Tuesday the stock registered a total volume of 66.34 lakhs. The stock is meeting Daryl Guppy’s multiple moving average (GMMA). The leading indicator of 14-period daily RSI has marked a fresh 14-period high and is above the previous swing high. Moreover, it is above the 60 mark. The daily MACD has stayed bullish as it is trading above its zero line and signal line. The MACD histogram is suggesting a pick-up in upside momentum. The +DMI is above –DMI and ADX. An uptick in ADX shows improvement in trend strength. The Elder Impulse System and Pring’s KST shows a strong bullish signal. Buy the stock with a stop loss of ₹ 449 for a target of ₹ 532 followed by ₹ 553. 

(Closing price as of Apr 05, 2022)

*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.