The Relative Strength Index (RSI), though, still above 60 is also showing some signs of weakness. The Nifty opened in the morning to make a new high and remained above the trendline throughout the day (in spite of the negative news of inflation measuring 7.57%), yet the RSI has not been able to cross its earlier high of 78. This clearly shows that the strength of this upmove is reducing. Looking more closely at the RSI, if it were to go below 50, it would confirm a bearish head and shoulders pattern and the price, sooner or later, would have to follow suit. 
If we take a look at the daily chart of the Nifty, here too, we find that there is a lot of resistance near 5300 and there may be some difficulty crossing it. If the price does decide to come down, we have a good support near 5100 too and, personally, I am not looking at the market going below 5100. As far as the RSI on the daily chart is concerned there seems to be no weakness of any sort visible as of now. All trendlines are intact, higher lows and higher highs continuing, no bearish divergence visible and the most definite sign of bullishness is that it is still above 60. Incidentally, the price is managing to trade above its 200 day simple moving average and in the event of the price coming down we have another support at this level of 5165. Keep stop losses below 5100 for long positions.
Financial Technologies has now broken through its downtrending trendline which was providing resistance near 1775. This breakout has been confirmed by the RSI with it crossing the barrier at 60 and signifies that it is now in the bullish territory. The volumes were not convincingly high but were the highest in the last 10 days. I would say it is good buy setup at current levels with a stop loss of 1700 for a target between 2400 and 2450. There might be some resistance near 2000 levels too.
GMR Infrastructure is still below its resistance line near 169. A buy signal has not come as yet but indications are that it may come tomorrow. We shall take the trade only if a buy signal does come about. That will come, if and, when the price is able to sustain above 172 after ignoring the movements of the first 30-45 minutes of the morning. If that happens the RSI would also be able to cross above 60 and the volumes have been remaining high since the last 3 days suggesting that a breakout may happen. Buy above 172 with a stop loss of 150 for a target of near 220.
Mahindra and Mahindra also has an interesting chart. It has not yet given a buy signal but would give if it were to go above 720. The risk to reward ratio for this trade is quite high and the reader should use her own discretion whether to take the trade or not. It was only on the basis of other auto stocks showing strength that I selected Mahindra and Mahindra. Buy above 720 with a stop loss of 640 for a target of 800. This means one would take a risk of Rs.80/- to get Rs.80/-, which is why I say that the risk to reward ratio is quite high.
Maruti Udyog seems to be a good buy above 800 with a stop below 720 for a target of near 1000. If it does cross 800, it would give a buy signal confirming the breakout from the downtrending line, the volumes already high giving an early signal of an impending breakout. The only thing that is not yet suggesting bullishness is the RSI being sub 60 but it is certainly moving in the right direction.
Happy Investing!!!
Read the Full Post Here
The Nifty remained in a very narrow range today. A movement of just 87 points in a day is nothing for the Nifty, especially when you compare it with the average range of 240 points for the last 10 days. A narrow range suggests indecision, as does a doji. A doji is when the closing price and the opening price is exactly the same or almost the same. A typical doji will have a candle which has an upper shadow and a lower shadow but no (or a very small) body. A narrow range day will have a small body but also small upper and lower shadows. These periods of indecision come generally at the market tops or market bottoms. The blue arrows on this daily chart of Nifty shows the dojis and narrow ranges and one can see that they have, generally, been formed near the tops or near the bottoms.
DLF is touching its resistance near 900. While there is nothing to tell us that it might go through its resistance but the very fact that it has tested this resistance 9 times in the last month and the fact that resistances do get broken sometimes, it may be time for it to go through it. On breaking out, there is evidence of it having a target of 1120 but we should be happy with a more conservative target of 1000 in this range bound market. Consider buying above 900 with a stop loss of 858 for a target of 1000. Avoid doing anything in the first 15-20 minutes of market opening. 
Financial Technologies has been consolidating in a range for some time now. Again, like DLF, there is nothing to suggest that this consolidation phase may be over but when the stock is near its support or resistance, we have to be prepared that if the stock does break out then what? Seeing the stock chart we see that it has some resistance near 2282. We should prepare ourselves to go long if the price were to go above this level. So, what do we do if it does not go above 2282? We wait till it does go through or we don’t take the trade till it remains below 2282. It has been making higher highs and higher lows and seems to be in a consolidation cum uptrend or an uptrend within a consolidation. So, with a stop loss of 2200, we go long if it crosses 2300 and we may well get a target of 2600. Avoid touching in the first 15-20 minutes. 
Jindal Steel also has a chart similar to Financial Technologies. It has been showing a pattern of higher highs and higher lows within this long consolidation pattern and now seems to have broken out of it, as looks evident from the increase in volumes on breakout. It can be bought above 2630 with a stop of 2300 for a target of 3100. But what does one do if the Nifty continues with the consolidation or breaks down? What happens to all these stocks? Well, they may still go up even if the Nifty remains down. This is why individual stop losses for all these stocks are taken into consideration. 
Bhagwan jab deta hai, chhapad phaad kar deta hai. That is true for chart patterns too. We again have a similar pattern in this 30 minutes chart of Neyveli Lignites with the volumes also increasing considerably on breakout. If one buys above 171 with a stop loss at 150, I don’t think a target of 210 will be too far off. 
It is all becoming a little monotonous by now. RNRL again has the same pattern so wont go into the details of explaining the pattern but just notice the increase in volumes on breakout. Buy above 155 with a stop loss below 142 and a target of between 200-210 should be achievable.
