After forming a Doji candlestick pattern on the weekly chart, the Nifty plunged nearly 200 points to close at 21,513 on January 8. A Doji formation on the weekly charts indicates indecision in trend after a prolong uptrend. Bearish implication of this pattern has activated as the Nifty broke the low of the Doji candle (21,500) during Monday’s session. The Nifty has also closed below its 13-day EMA (exponential moving average) support placed at 21,515.
The Nifty has confirmed the lower top and lower bottom formation on the daily chart. Recent swing high of 21,763 becomes the immediate resistance and till that level is taken out, the short-term trend would remain bearish in the benchmark.
Indicators and oscillators like MACD (moving average convergence divergence) and RSI (relative strength index) have turned bearish on the daily chart, which further confirms the change in trend from bullish to bearish.
Technical setup of the Bank Nifty seems weaker than the Nifty. On the daily time frame, the Bank Nifty has confirmed the breakdown from a bearish head-and=shoulder pattern. The downside target of the index comes in around 46,500 in spot. Recent swing high of 48,382 becomes the strong resistance in the Bank Nifty and shorts can be initiated with that stop-loss.
Midcap and Smallcap indices are still in an uptrend. However, RSI oscillator has reached the extreme overbought zone for both the indices, which signals caution in the short term.
MSCI World index found resistance at the upward sloping trendline on the daily charts and that could show some retracements in the developed equity markets.
Considering these technical evidences, we cannot rule out the possibility of extension in the correction. Sustainable level below 21,500 in spot Nifty could drag the index towards the next support of 21,127, which happens to be 23.6 percent retracement of the entire swing seen from 18,837 (October 2023 bottom) to 21,834 (all-time high registered on January 1). Close above 21,764 would negate the downtrend in the Nifty and in that case Nifty could see a level of 22,000 and beyond.
Here are two buy calls and one sell call for short term:
Alkyl Amines Chemicals: Buy | LTP: Rs 2,546 | Stop-Loss: Rs 2,428 | Target: Rs 2,875 | Return: 13 percent
Stock price has broken out from downward sloping trendline resistance. Stock price has formed double bottom formation at Rs 2,120 odd levels and reversed north. Stock price is now placed above all important moving averages, indicating bullish trend on all time frames.
Indicators and Oscillators like MACD and RSI have turned bullish on the daily charts. Price breakout is accompanied with jump in volumes.
Aditya Birla Capital: Buy | LTP: Rs 175.40 | Stop-Loss: Rs 167 | Target: Rs 188 | Return: 7 percent
The stock price has broken out from the bullish “Flag” pattern on the weekly chart, which indicates the continuation of an uptrend after running correction. NBFC stocks are looking relatively stronger on the charts and are expected to outperform in the coming days.
The stock is placed above 20, 50 and 200 DMA, which indicates uptrend on all time frames.
UPL January Futures: Sell | LTP: Rs 562 | Stop-Loss: Rs 585 | Target: Rs 520 | Return: 7.5 percent
The stock price has formed lower top and lower bottom on the daily chart. Stock price has breached important moving average supports, which indicates the bearish trend reversal. Stock price fall is accompanied with jump in volumes which further confirms the down trend.
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