NIFTY Index Chart Analysis

NIFTY Index Chart Analysis 

Nifty taking a breather on the upside, looking to scale 11080 

Indian stock markets have turned vulnerable to the international events and domestic seasonal triggers. The Brent crude could not sustain above USD 79.70 and failed to breach its double top at USD 80.50, thereby retreating sharply below its multiple supports around USD 72.40 level. This was in the wake of comments from the US treasury on relaxing some restrictions on imports from Iran. Indian rupee too bounced back due to this and is off its all-time low levels. The positive domestic macroeconomic numbers had been cushioning the markets so far despite weak global cues. 

India's CPI number hit 5-month high at 5% as against 4.87% in May and 1.47% in June 2017. This was expected due to higher fuel prices despite easing of food prices and lessening chances of RBI adopting monetary easing. On the other hand, industrial production hit 7-month low at 3.2% due to subdued performances from both manufacturing, power and poor offtake from FMCG sector. Even the WPI number hit 54-month high at 5.77%, while trade deficit expanded 17.57%. However, markets kept going because of lower-than-expected CPI ahead of a better outlook on IIP growth in FY19 and also due to revival in Q1FY19 corporate results from frontliners, which kicked off last week. Now, all eyes are on the upcoming results, which will direct the markets in the coming days.

 

Indian benchmark indices have not just bounced back, but have also succeeded in breaching their crucial resistance levels, whereas the broader indices are still striving with lower tops and lower bottoms. Our benchmark index Nifty broke out of its symmetric triangle on a closing basis at 10800 on July 9. Further, it also breached its two major resistances at 10893 and 10929 made on June 13 and May 15 respectively. Nifty crossed the 11000-mark at 11078 and corrected up to 10925, near to the 23.6 per cent retracement level of the rally from 10557 (its 100-day EMA support) to 11078 and bounced back on July 17. The breakout and rally was supported by good volumes and the 14-period RSI downward sloping trendline breakout at 59, followed by a pullback up to the trendline and a bounce back, currently quoting at 63.

Going forward, we hold 11080-11117, followed by the Nifty peak, as the resistance levels. On the downside 10920-10880 would act as the supports, followed by 10815. 

For the medium term, 11350-11400 would act as the resistances, while 10750 followed by 10630, will act as the supports. Above 11400, Nifty has a triangle pattern target of 11775. On the downside, 10550 will act as major support and can act as trend reversal if broken. 

STOCK RECOMMENDATIONS 

NIIT TECHNOLOGIES............. BUY............ CMP Rs 1121.15 

BSE Code : 532541
Target 1 .. Rs 1190
Target 2 ..... Rs 1210
Stoploss....Rs 1050(CLS)

 

The stock of NIIT Technologies is currently trading at Rs 1118. Its 52-week high and low stand at Rs 1189.60/ Rs 462.95 made on April 30, 2018 and August 10, 2017, respectively. Considering the daily time frame, after hitting 52-week and all-time high, the stock entered into a corrective to sideways phase and this led to formation of a symmetric triangle-like pattern. The stock had attempted to hit above Rs 1147 level as its major resistance of June 13 on June 21 and July 13, but it could not sustain on a closing basis and kept on hitting the lower trendline level. However, recently on July 17, the stock hit its lower trendline support, which is also its 50-day EMA support, and bounced back sharply on intra-day basis. On the weekly time frame, the stock has formed a kind of pennant pattern with a likely breakout at Rs 1162 level. The volumes are justifiable and the 14-period RSI on the weekly time frame is quoting above 60, suggesting continuation in the momentum. We recommend a BUY before a breakout. 

LARSEN & TOUBRO............ SELL............. CMP Rs 1287 

BSE Code : 500510
Target 1 ..... Rs 1206
Target 2 ..... Rs 1180
Stoploss....Rs 1370 (CLS)

  

The stock of LT Ltd is currently trading at Rs 1277.95. Its 52-week high/low stand at Rs 1469.10/Rs 1114.55 which were made as on February 1, 2018 and August 22, 2017, respectively. Considering the daily time frame, after hitting 52-week high, the stock witnessed a reversal Doji and, thereby, tumbled sharply up to Rs 1261 level, which is its upward sloping trendline support level. Thereby, the stock bounced back, but hit a double top at Rs 1424 levels and retreated. Finally, the stock breached its upward sloping trendline, which also acted as the head & shoulders pattern neckline breakdown at Rs 1343 and tumbled sharply up to Rs 1207. The stock hit a reversal Doji yet again and surged, but it faced resistance at 50% retracement of the downward rally from Rs 1420 to Rs 1206. Now the stock has a small 'rising wedge' or an extended 'bearish pennant' kind of pattern, which if broken on a closing basis at Rs 1285, can drag the stock some more in the coming sessions. We recommend a SELL.