What’s up ahead: Nifty50 set for a breakout; time for sector rotation
By Milan Vaishnav, CMT
The domestic equity market will open after an extended weekend as Monday was a trading holiday on account of Holi. The weekend, however, was extremely eventful and on Tuesday, we will see an imminent gap-up opening as the market shall very buoyantly react to Saturday’s UP election outcome wherein the BJP made a clean sweep achieving absolutely majority.
We had often mentioned a number of times in the previous notes that the Nifty has been consolidating with an upward bias. It had not only digested the near-imminent US interest rate hike this March but instead prepared itself for an upward breakout at an appropriate time. On Tuesday, the Nifty will see a gapup opening, taking cues from the election outcome. The election outcome is likely to provide a huge impetus to reforms as it will positively alter the equations in the Upper House of Parliament and make passage of important bills much easier.
We will see Nifty giving a thumbs-up to this and make a long-awaited decisive breakout scaling fresh lifetime highs.
Speaking purely on technical grounds, the 9,065 and 9,120 levels will act as immediate resistance levels for the index on Tuesday. However, the highs that the Nifty may form may go beyond these levels.
The Relative Strength Index or RSI on the daily chart stood at 64.3720 and this remains neutral, showing no bullish or bearish divergence or failure swings. The daily MACD still continues to remain bearish while trading above its signal line. No significant major formation is observed on candles.
Nifty March futures had ended the day adding yet another 5.96 lakh shares or 2.62 per cent and it had continued to show bullish buildup in the Nifty.
Pattern analysis shows two things very clearly: the Circled area on the charts was the likely area wherein the market was expected to consolidate. As evident from the charts, it did consolidate in the marked area while showing upward bias. The area was a major double top resistance area on the daily charts and any upward breach would have meant a decisive breakout for the Nifty.
Today, with a big gapup opening, the Nifty will, in all likelihood, achieve this decisive breakout.
All and all, beyond all usual analysis, a gap-up opening is imminent and we will see the session remaining rangebound post gapup opening. Any serious profit booking at higher levels is not expected to soon and we might see the NIFTY trending in sideways trajectory post all-likely gap up opening.
Importantly, all the sectors getting positively affected by the pending bills and contributing to faster reforms will be chased in frenzied manner. Overall, we advise traders to book any profit that is significant and make fresh allocation to sectors expected to gain directly from the development that happened over the weekend.
Effective sector rotation is advised.
STOCKS TO WATCH:
1. LARSEN & TOUBRO: L&T has been trading in a capped range and in sideways trajectory over some time. The stock is likely to make a strong up move above Rs 1,495-1,500 levels and can be bought above Rs 1,500 with expected target of Rs 1,670 over coming days. Lead indicators show likely resumption of an uptrend and also the RSI show positive divergence as against the price.
The relative strength is improving and the Bollinger Bands which are 70% narrower than normal further increase the possibility of a sharp up move. (Any call on this above the prescribed level would be positional and not intraday.)
2. MRF: We recommend to buy and accumulate MRF with all declines. After forming highs near Rs 55,945 levels, the stock did not report a breakout from its previous high and continued to remain in trading range. On the weekly charts, this has resulted into a “flag” like formation, which indicates strong continuation of the trend in the present direction. The lead indicators remain in continuing buy mode and show positive divergence as against the price. The relative strength is improving and the Stock is expected to touch Rs 56,650-57,000 levels over coming days.
(Any call on this above the prescribed level would be positional and not intraday.)
(Milan Vaishnav, CMT, is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)
The domestic equity market will open after an extended weekend as Monday was a trading holiday on account of Holi. The weekend, however, was extremely eventful and on Tuesday, we will see an imminent gap-up opening as the market shall very buoyantly react to Saturday’s UP election outcome wherein the BJP made a clean sweep achieving absolutely majority.
We had often mentioned a number of times in the previous notes that the Nifty has been consolidating with an upward bias. It had not only digested the near-imminent US interest rate hike this March but instead prepared itself for an upward breakout at an appropriate time. On Tuesday, the Nifty will see a gapup opening, taking cues from the election outcome. The election outcome is likely to provide a huge impetus to reforms as it will positively alter the equations in the Upper House of Parliament and make passage of important bills much easier.
We will see Nifty giving a thumbs-up to this and make a long-awaited decisive breakout scaling fresh lifetime highs.
Speaking purely on technical grounds, the 9,065 and 9,120 levels will act as immediate resistance levels for the index on Tuesday. However, the highs that the Nifty may form may go beyond these levels.
The Relative Strength Index or RSI on the daily chart stood at 64.3720 and this remains neutral, showing no bullish or bearish divergence or failure swings. The daily MACD still continues to remain bearish while trading above its signal line. No significant major formation is observed on candles.
Nifty March futures had ended the day adding yet another 5.96 lakh shares or 2.62 per cent and it had continued to show bullish buildup in the Nifty.
Pattern analysis shows two things very clearly: the Circled area on the charts was the likely area wherein the market was expected to consolidate. As evident from the charts, it did consolidate in the marked area while showing upward bias. The area was a major double top resistance area on the daily charts and any upward breach would have meant a decisive breakout for the Nifty.
Today, with a big gapup opening, the Nifty will, in all likelihood, achieve this decisive breakout.
All and all, beyond all usual analysis, a gap-up opening is imminent and we will see the session remaining rangebound post gapup opening. Any serious profit booking at higher levels is not expected to soon and we might see the NIFTY trending in sideways trajectory post all-likely gap up opening.
Importantly, all the sectors getting positively affected by the pending bills and contributing to faster reforms will be chased in frenzied manner. Overall, we advise traders to book any profit that is significant and make fresh allocation to sectors expected to gain directly from the development that happened over the weekend.
Effective sector rotation is advised.
STOCKS TO WATCH:
1. LARSEN & TOUBRO: L&T has been trading in a capped range and in sideways trajectory over some time. The stock is likely to make a strong up move above Rs 1,495-1,500 levels and can be bought above Rs 1,500 with expected target of Rs 1,670 over coming days. Lead indicators show likely resumption of an uptrend and also the RSI show positive divergence as against the price.
The relative strength is improving and the Bollinger Bands which are 70% narrower than normal further increase the possibility of a sharp up move. (Any call on this above the prescribed level would be positional and not intraday.)
2. MRF: We recommend to buy and accumulate MRF with all declines. After forming highs near Rs 55,945 levels, the stock did not report a breakout from its previous high and continued to remain in trading range. On the weekly charts, this has resulted into a “flag” like formation, which indicates strong continuation of the trend in the present direction. The lead indicators remain in continuing buy mode and show positive divergence as against the price. The relative strength is improving and the Stock is expected to touch Rs 56,650-57,000 levels over coming days.
(Any call on this above the prescribed level would be positional and not intraday.)
(Milan Vaishnav, CMT, is Consultant Technical Analyst at Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)
