Buy these 2 shares for gains; Nifty may hold 17200-17000, Bank Nifty may test 35800 if it breaks 36500

Buy these 2 shares for gains; Nifty may hold 17200-17000, Bank Nifty may test 35800 if it breaks 36500

Bank Nifty after forming a bearish engulfing candlestick pattern on September 28 witnessed a steep fall of about 1400 points from its all-time high levels. (Image: REUTERS)

By Rohan Patil

Nifty 50 was trading in a rising channel formation since July 28 and registered its lifetime high of 17947.65 on September 24 giving a return of 15% in just three months. The Benchmark index on September 30 has broken the lower band of the rising channel pattern and has witnessed a breakdown of a rising channel pattern on the daily time frame.

Prices have breached their upward rising trend line but have taken strong support at the 21-day exponential moving average and acted as an anchor point for the index. Prices started with a negative note for the October month expiry and closed below its important support levels of 17600 levels.

China is facing its worst energy crisis in recent times as Beijing tries to crack down on power-guzzling industries in order to stick to emission targets. As a result, 44% of the industrial activity in the world’s second-largest economy is impacted due to the power shortage. It started with factories in 3 provinces facing severe power cuts, but now residential areas in over 20 provinces are facing outages.

On the weekly chart, prices have formed a bearish dark cloud cover candlestick pattern and prices have slipped almost two per cent from its previous week’s closing. On the indicator front, daily RSI is at 58 and has shown a bearish divergence with negative crossover, where the price had made higher highs but RSI made a lower high. For September month we saw an outperformance from the Nifty Media & Nifty Realty index with a gain of more than 30% on the monthly closing basis.

As of now, there is no indication of Nifty sliding below the 17200 – 17000 levels, but you never know how global development pan out. The resistance is pegged at 18000 levels.

Bank Nifty to face resistance at 38000

Bank Nifty after forming a bearish engulfing candlestick pattern on September 28 witnessed a steep fall of about 1400 points from its all-time high levels.

The banking index was trading in a rising channel pattern for the past one month with a higher high higher bottom formation on the daily interval. Prices have opened near the lower band of the pattern on October 1 but were able to recover from the lower levels and hence prices were able to close just near the lower band of the pattern.

On the weekly chart banking index has also formed a bearish engulfing candlestick pattern and it will be important to watch if prices give a bearish confirmation in the this trading week.

Momentum oscillator RSI (14) has just closed near 50 levels with negative crossover after registering a negative divergence on the daily interval. The MACD indicator has also given an early indication of a trend reversal by closing below its signal line.

Currently, the Banking index is trading above its Parabolic SAR indicator on the weekly chart which is placed near 36500 levels. Major resistance is placed near 38000 levels & on the downside; if prices break below 36500 then we may test 35800 levels.

SUN Pharma: BUY

CMP: Rs 826 | Target: Rs 884 | Stop Loss: Rs 790

Return: 7%

The prices were trading in a rectangle formation since past two months and have formed a trend line resistance at 797 levels. SUNPHARMA has broken out of a rectangle pattern at 805 levels on 29th Sept and the prices have registered a decisive breakout that suggests a change in the trend from sideways to upside.

Stock is trading above its 21, 50 & 100- day exponential moving averages on daily time frame, which is positive for the prices in the near term.

MACD indicator is reading above its centerline with positive crossover above its signal line. Momentum oscillator RSI (14) is reading above 60 levels which indicates positive momentum will like to continue ahead.

CRAFTSMEN: BUY

CMP: Rs 2106 | Target: Rs 2250 | Stop Loss: Rs 2021

Return 7%

CRAFTSMEN has given a spectacular rally from the low of 1648 on 21st June 21, to an all-time high of 2173 on 12th July 2021, and post that rally prices went in a sideways consolidation for more than two months and traded in a range between 1800 to 2000 levels.

CRAFTSMEN has formed a rectangle pattern formation within that two months period and finally broken out of a rectangle pattern at 2140.40 levels on 23rd Sept and the prices have registered a decisive breakout that suggests a change in the trend from sideways to upside.

Stock is trading above its 21, 50 & 100- day exponential moving averages on a daily time frame, which is positive for the prices in the near term.

When we observe volume activity there has been above-average volume set up from the past couple of weeks on the daily chart, which indicates accumulation phrase. Momentum oscillator RSI (14) is reading above 60 levels with positive crossover on the daily scale.

(Rohan Patil is a technical Analyst at Bonanza Portfolio, Views expressed are the author’s own. Please consult your financial advisor before investing.)

Applied Elliott Wave webinar: Bitcoin, crude oil, gold, S&P 500 and Nifty 50 [Video]

Timestamps

04:30 – Crude Oil.

23:40 – Gold.

31:00 – SPX.

36:00 – Nifty 50.

43:00 – Courses and upcoming batch.

46:20 – Bitcoin.

Welcome to our 38th webinar in the series of these applied Elliott Wave monthly webinars that I’ve been doing. The way we’ll proceed is, first of all, we’ll look at the chart of WTI. Crude Oil, gold followed by S&P, Nifty and BTC. If we get time, we might as well look at some other stocks, possibly. But this is the general trend we will follow. And these are the major instruments that we will track. Now that everybody is able to hear and watch the screens, just one final hears from any one of you and I will start off with our discussion on crude oil.

We are now going to look at the chart of crude oil and as you can see, we have the light crude NYMEX futures loaded. Do keep in mind sometimes I will keep switching from the NYMEX to oanda cfd – contract as well. And if you will notice here the o and a Price Is 75.861 and the NYMEX futures price is 75.74. So there is a slight difference The reason being that one is a CFD contract contract and another is a futures contract traded on the New York smokin NYMEX, New York Mercantile Exchange. Right. So, now that we have these charts and I made everything clear, David says the book will be fantastic. Yes David, I hope so, and I hope a lot of audience will benefit from it.

Okay guys, so, first of all our point of reference in this particular discussion will be the level of around 7683 which is the sixth July 2021. Date and 1230 I S time right. From this point of reference, I recall in the last webinar, we were somewhere here we were discussing I think this I don’t exactly know. So, anyways, from this point of reference, we have basically two propositions right the first proposition being that we are in a flat correction or a triangle correction right. And the second proposition is the correction which was way four basically is already complete right.

So, let’s explore that let me just move this chart a little bit to the side or the point of reference okay. So, the first proposition is suggesting that we have a downward move and this downward move if you look from this point of reference is complete over here Okay, is this downward move as W X Y or an ABC or a W X Y Z whatever it may be, there are basically multiple multiple possibilities, for instance, the one which I just thought of is that how about we take this progression as he likes this as a triangle right and this has the next leg down so that will make it an ABC progression. So in Elliott Wave terminology is for those of you who might not be very well familiar with it, ABC progression is a zigzag which is in this particular case a zigzag could be multiple things and a zigzag could mean that the whole leg which started from here has completed at this point at the C but if that is true and if this leg is completed the whole progression is C then that means this market has clearly made a base and once the base is formed then that means the last at least should be taken out.

So in this particular case our last high is this level around 7694. So since it is not taken out yet our current hypothesis which we which I’m going to presume as h2 which is basically suggesting straight up as to why the wave B hypothesis two if you are not really following my work. So I like to derive the market into multiple formats or not formats multiple ways the market can process like hypothesis one, hypothesis two, and then we try to conclude if we have a commonality or strength in one of the hypotheses compared to the other one. Okay, anyways, going ahead with our hypothesis two, we are suggesting that this market has completely done the corrective part and then new leg should come up. So there is not much to discuss in it. If this has really found the low here, then that should be it’s going up and all right, everything is good and rosy and it should at least clear this last low last high sorry, 77.04 something on the light crude oil NYMEX chart, it should obviously go much higher, but that’s the minimum we expect.

However, we are not interested in things which are too rosy we want to get a more radical analytical view or what to do when things are not going out as we thought they would right. So, there comes in play our hypothesis one which will suggest that this market has although completed a leg in the downward direction as an ABC that is just a part of a bigger correction. Okay. So when I say part of a bigger correction, that basically means that this market is still going sideways. That’s what generally a correction is an Elliott Wave terminology sideways movement, generally speaking.

So when we say that the market is still possibly going sideways, then we are suggesting that most likely it will remain within this box range that is within the highs and lows of 77 and low of around 61 right. Most common setups that fall within this category are flats and triangles, it could become complex, but that is not something we will comment on right now. So we are going to discuss the most likely scenario or the most deceptive not the likely one. The most deceptive scenario in this particular case will be that this market goes on and forms a flat correction and in specific it forms correction of the salt I have a down.

Trade Setup: Nifty looks stable, expect select sectoral indices to outperform

ETMarkets.com

The domestic equity market saw a solid bounce on Monday. Nifty not only bounced back sharply, but also stayed in a range that showed hope. Nifty saw a positive start to the day. After starting with gains, the index only got stronger, as the session progressed. It marked the day’s high point in the late morning trade. The second half of the session saw the 50-pack pare some of the gains. It came off the high point, but spent the remainder of the session in a sideways trajectory.Nifty managed to protect bulk of its gains and finally ended the day with with a net gain of 159.20 points (+0.91 per cent). The session remained important from a technical perspective. It has defended the lower edge of the consolidation range at 17,400. Now the broad range of 17,950-17,400 has got well defined on the chart as a consolidation zone. In this zone, it will be important to watch the 17,800 level, as it can offer resistance as per the Options data.Volatility continued to decline; India VIX came off 2.76 per cent to 16.7350. For Tuesday and for the immediate short term, it will be important to observe Nifty’s behaviour vis-à-vis the 17,800 level, as it holds the second-highest accumulation of Call Open Interest followed by the 18,000 level.Tuesday’s session may see a stable start to the day. The 17,750 and 17,800 levels will act as potential resistance points, while supports will come in at 17,650 and 17,580 levels.The Relative Strength Index ( RSI ) on the daily chart stood at 63.80; it remained neutral and did not show any divergence against the price. The daily MACD remained bearish and traded below the Signal Line.A Morning Star Pattern is seen on the candles. However, before calling it a classical Morning Star, we need to understand that since it has emerged near the upper levels or the high point range, it may not be as potent as it should be. Also, it will have its limited potency given the fact that it has occurred during a broad consolidation and not following a decline.All in all, the inherent strength in the markets remain intact. The 17,400 level has marked itself as an important support point for Nifty. On the higher side, the 17,800-17,950 zone would be a crucial resistance for Nifty to navigate going ahead. The market has been showing sector-specific performances over the past few days. This will continue to persist and we will see specific sectors like banks, autos, auto ancillary, pharma, and select PSE stocks continuing to relatively outperform. While keeping overall exposures at modest levels, a cautiously positive view is advised for the day.(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae and is based at Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)