We all know that the broader indics Nifty is trading higher, it is trading at 28 months high price. The question or concern here is, Will it keep going up? Will it hold the higher price? or When will it break? Before answering these questions, lets drill down to the reality with respect to Technical Analysis.
If we go back to an year before, the initial boost for Nifty came from IT & Pharma companies. The recent rallies was due to raise in Banking, Engineering, Auto mobile, FMCG & Oil Companies.
Nifty has rallied 692.20 points or 12.60% from the recent bottom of 5495.10 on April 09, 2013. Not all strongest stocks are participated in the rally. There are quite some of strongest and weakest stocks contributed the rally.
Top 15 stocks contributed in the recent rally
||Price on April 09
||Price on May 17
Top 10 stocks which didn’t contributed in the recent rally
||Price on April 09
||Price on May 17
If you look at the table, not all strongest stocks are participating the rally. It kind of shows some of the strongest stocks are loosing the momentum. In the other hand, some of the weakest stocks are also gaining momentum, but is it good enough to offset the space created by strongest stocks? We need to wait and watch for that.
In the long term chart (right from 2008 high), Nifty is forming formation of Ascending Triangle which is a good sign for long term. For the final confirmation of ascending triangle, Nifty has breakout of 6350 mark with reasonable volume. Nifty needs to be closely watched in the upcoming sessions. If it could not go above 6350, then it is more likely it will head towards south.
Followed by sharp fall in last three days on Feb 2013 (Ranbaxy went down from 440 to 374 in three days time), Ranbaxy Laboratories Limited (NSE: RANBAXY, BOM:500359) started going up every other day. The stock prices are making higher high and higher low in the chart. Though the price makes higher high, the momentum indicators such as MACD & RSI are forming lower high to create Negative Divergence in the chart.
In the weekly candlestick chart, Ranbaxy forms Evening Doji Star. Typical Evening star patterns will appear after sharp price raise in the stock. Evening star with doji in the middle confirms that the stock is topping out and it couldn’t hold in the higher levels.
One can go short on Ranbaxy with target of 407 with stop loss of 455-460 levels. Friday the stock closed at 448.80 with volume of 3,61,552 shares in National Stock Exchange.
Andhra Bank (NSE:ANDHRABANK, BOM:532418) forms Decending Triangle pattern in the daily candlestick chart. The Decending Triangle pattern is one of the trend continuation pattern wherein the current trend is likely to be continued. Andhra Bank already did enough to disappoint investor by going down from 130 levels to 90 levels. The recent formation of decending triangle is likely to taken stock even down.
The upper slopping line of the triangle is trading around 93 while the lower end of the triangle is trading at 90. Andhra bank is in safe zone, till it trades within the arrested range of 93-90. But if it breaks below 90, its going to see new 52 weeks lows. So one can short it below 90 with stop loss of 93.
Friday the stock closed at 91.45 with volume of 1.42 Million shares.
Reliance Infrastructure Limited (NSE:RELINFRA, BOM:500390) is one of the heavily beaten down stock in the first quarter of 2013. During this period the stock went down from 572 50 to 315.00 levels. Its not only Reliance Infra, almost all Ambani group stocks such as Reliance Capital, Reliance Communications, Reliance Power and Reliance Media went down like anything.
During the last one month, the stock was in range bound to upward momentum. The 20% move from the bottom is likely to be continued for near term. Its highly likely that the stock will move up to the Fibonacci Retracement of last fall which comes around 473.00. One can go long with Reliance Infra with target of 473 and stop loss of 364.
On a closing basis, the stock closed at 387.90 on Thursday.
In last ten days Bank Nifty went up from 10929 levels to 12755 levels. Friday Bank Nifty had touch time to hold on to the profit. In the next week, profit taking will be inevitable.
The major index contributors like HDFC Bank, ICICI Bank and State Bank India are started showing oversold signals. Those three stocks contributes more than 75% of the Bank Nifty value. So its highly likely that these stocks will pull down the Bank Nifty towards south.
One can short Bank Nifty with target of 11615 and stop loss of 12725 levels on closing basis.
Last Friday Bank Nifty opened at 12,679.30 and closed at 12,533.15. It went down by -193.70 points or -1.52%. Bank Nifty had turn over of 1,874.00 crs.