Nifty has been trading in the downward sloping channel since February 16, 2021. Trading in channel indicates that Market is passing through consolidation phase. During this phase, trend remain choppy and direction less. However, looking at the recent developments on the Nifty charts, it seems that Index is likely to breakout from the consolidation soon. Major reason has been the strong breadth in the Market. Strong Advance-Decline ratio in consolidating market indicates the chances of upward trend sooner or later.
Indicators and oscillators like MACD, DMI and RSI have shown some early sign of breakout in the Index. Daily MACD has reached above the equilibrium line. RSI has been positing higher bottoms and has also shifted its range upward. DMI indicator has turned bullish, as +DI has crossed –DI line on the upside.
Formation of higher bottom at 14,416 in Nifty, could be an advance signal of possible upcoming breakout. Confirmation of breakout in Nifty would come, once it sustains above 15,000 levels. Above 15,000, Nifty could extend its gains towards new all time highs above 15,431. Support for the Nifty would remain at 14,700, below which possible bullish setup would be violated. However, looking at the other indicators chances of bullish breakout seems higher than bearish breakout.
Stock recommendation:
Buy Bharat Forge (667) | Target: Rs 725 | Stop-loss: Rs 633
The stock price has broken out from bullish "Flag" pattern on the Weekly charts. Rising volumes during the breakout has validated the upside breakout. Stock has been trading above important moving average parameters, indicating uptrend on all time frames. Auto Sector has resumed its uptrend after major correction. Stock price has broken out from the consolidation which held for previous 3 months. Indicators and oscillators like RSI, MACD and DMI have turned bullish on short term charts
Buy Bosch Ltd (14,239): | Target: Rs 15,000 | Stop-loss: Rs 13,740
The stock has broken out from downward sloping trend line on the daily chart. Stock has also surpassed crucial resistance of 50 days EMA. Volumes have started rising along with the price rise for last three weeks. RSI has broken out from downward sloping trend line and has reached above 50 levels. Daily MACD has crossed its signal line on the upside. Daily DMI indicator has turned bullish as +DI has crossed –DI on the upside.
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Disclaimer: Vinay Rajani is Senior Technical and Derivative Research Analyst at HDFC Securities. The analyst doesn't have any holding in the stock. Views are personal
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