Technical Analysis

SPOT NIFTY : The domestic markets failed to move higher in a truncated week. Nifty has formed a perfect Doji candle and an inside bar on the weekly chart. It took support at a 10-week average. However, it closed below the prior day low and formed minor swing highs at 18,342 and 18,012. These levels will act as immediate resistance. It also formed minor swing lows at 17,968 and 17,613. With this price structure, the minor trend is the downside. For the last three days, 34-EMA is working as strong support. The 50-DMA support is at 17,648. For the near term, the 17,613-648 cluster will be a very crucial support. The 38.2 retracement of the rally from the low of July 28 is at 17,423. During February-April, Nifty retraced 61.8 per cent of the prior intermediate upswing. The current retracement is also a little over the 61.8 per cent retracement level.

In this scenario, the next week's market move is critical and will be a decisive trend signal.

In any case, if the index fails to form a higher high, it may test the level of 17,423 sooner or later. The negative market breadth has the chance of consolidation for the next 3-4 weeks. Currently, Nifty has had five distribution days in the last 45 days. Any increase along with the closing below the 50-DMA will change the market structure as an uptrend under pressure. Two distribution days will expire next week. The RSI has declined below 50 and the momentum is not at all positive for now. The negative momentum indicator i.e. -DMI is above the +DMI and is about to cross over ADX. Besides, the falling ADX is not a good sign for the market.

The Mansfield Relative Strength is below the zero line, which indicates underperformance. Currently, it’s better to wait for a clear market direction. Stay light on position size and avoid aggressive leverage positions for at least the next couple of weeks. Focus on stronger stocks to take moderate positions.

REVIEW OF STOCK STRATEGY

We had recommended our readers to buy the stock of Heritage Foods Ltd at Rs 497 in issue no. 02 (dated November 01, 2021). Post our recommendation, the stock moved higher in line with our expectations and went on to touch the level of around Rs 544.80. We had given a ‘book profit’ message at the level of Rs 528.55 via our SMS service on November 01, 2021. Thus, investors, who had taken positions according to this strategy, would have made a decent profit.