Weekly analysis : ACTION SHIFTS TO MID & SMALL CAPS - 07/08/2020

ACTION SHIFTS TO MID & SMALL CAPS – 07/08/2020.

 

SETTLING IN A TRADING RANGE.

 

After being witness to a stupendous one way Rally of over 50% in Nifty and Sensex, the focus now seems to be shifting. The figures this week suggest that the Nifty has now settled in a Trading Range from 10900-11400. The lower boundary of this Trading Range is a result of 200dma and a constantly rising Trendline (which continues to defy gravity). The upper boundary is a result of historical Weekly Trendline obtained by joining bottoms made in Oct 2018 and Sep 2019. Even though the weekly gain for the Nifty was above 1% but the action has clearly shifted to the Mid & Small Cap arena; both of which registered a weekly gain of 4% to 5%. To register good returns in the near term, one should focus on good Mid & Small Cap stocks; till the time Nifty gives a breakout of the Trading Range which it has got into.

 


ACTION SHIFTS TO MID & SMALL CAPS – 07/08/2020.

 

SETTLING IN A TRADING RANGE.

 

After being witness to a stupendous one way Rally of over 50% in Nifty and Sensex, the focus now seems to be shifting. The figures this week suggest that the Nifty has now settled in a Trading Range from 10900-11400. The lower boundary of this Trading Range is a result of 200dma and a constantly rising Trendline (which continues to defy gravity). The upper boundary is a result of historical Weekly Trendline obtained by joining bottoms made in Oct 2018 and Sep 2019. Even though the weekly gain for the Nifty was above 1% but the action has clearly shifted to the Mid & Small Cap arena; both of which registered a weekly gain of 4% to 5%. To register good returns in the near term, one should focus on good Mid & Small Cap stocks; till the time Nifty gives a breakout of the Trading Range which it has got into.

 

TECHNICALLY SPEAKING.

 

Sensex opened the week at 37595, made a high of 38221, low of 36911 and closed the week at 38040. Thus it closed the week with a gain of 434 points. At the same time the Nifty opened the week at 11057, made a high of 11256, low of 10882 and closed the week at 11214. Thus the Nifty closed the week with a gain of 141 points.

 

On the daily charts, both the indices have formed a small white body Spinning Top for past two days, indicating a consolidation. On the weekly timeframe, both the Sensex and Nifty have formed a White body candle. It has a Real body and a long lower shadow which indicates buying activity at lower levels. Thus weekly candlestick analysis suggests a Bullish bias in the near term.

 

The indices have settled in a Trading Range between Sensex 36900 to 38700 and Nifty 10850-11370. The Upper Boundary of this Trading Range is defined by the historical Weekly Trendline (Sensex 38684 and Nifty 11361) obtained by joining the critical bottoms made in October 2018 and August 2019. The Lower Boundary is defined by the critical 200dma (Sensex 36878 and Nifty 10850). A break of upper boundary will lead the Nifty to Resistance offered by daily Bearish Gap at 11384-11536. A break of lower boundary defined by 200dma, can lead the indices down to test the higher bottom at Sensex 35877 and Nifty 10562.

 

The daily Trendline (Sensex 37469 and Nifty 11131) which continues to support the Market, since the start of this current upward Rally, again did the trick on Monday and Tuesday. Despite the Trendline being extremely steep, it continues its business of providing Support every time. But after such a stupendous rally, it is now just a matter of time before it gets breached.

 

Bullish Island still holds, whose failure point is below the Low of Opening White Body Marubuzo which is at Sensex 32348 and Nifty 9544. In case of a failure of Bullish Island, Market will go down to test the higher bottoms at Sensex 29968 / Nifty 8806.

 

Both the indices are above the Short term average of 20dma (Sensex – 37497 and Nifty – 11035) as well as Medium term average of 50dma (Sensex – 35876 and Nifty 10574). Both the indices successfully tested the Long term average of 200dma (Sensex – 36878 and Nifty – 10850). Thus the Trend in the Short term as well as Medium term Timeframe is Bullish, whereas the Trend in the Long term Timeframe also continues to be Upwards.

 

MACD is positive but in Sell mode. Price ROC is positive and continues in Buy mode. RSI (62) has dropped but still suggests bullish momentum. Stochastic Oscillator %K (66) is above %D and hence in Buy mode. ADX (37) suggests UpTrend is strong. Directional Indicators continue in Buy mode as +DI continues above -DI. MFI (52) suggests Positive Money Flow. OBV continues in Buy mode. Buy signal in Bollinger Band stands negated this week. Thus Oscillators are suggesting a mixed bias.

 

Options data for August series indicate highest Call Open Interest at the strike of 11500. Highest Put build-up is at the strike of 11000. Thus Options data suggest a short term trading range with Resistance @ 11500 & Support @ 11000.

 

INDEX LEVELS:

 

 

S3

S2

S1

CLOSE

R1

R2

R3

Nifty

10713

10894

11056

11214

11341

11462

11591

Sensex

36254

37024

37601

38040

38617

39087

39563

 

THIS WEEKS RECOMMENDATIONS:

 

STOCK

CMP

SL

Tgt-1

Tgt-2

Buy SRF

4081

4002

4203

4328

Buy AuroPharma

906

885

939

975

Buy AmberEnt

1779

1739

1841

1905

Buy Persistent

1000

980

1031

1063

Buy Star

523

511

543

565

 

Disclaimer : The recommendations made herein do not constitute an offer to sell or a solicitation to buy any of the securities mentioned. No representations can be made that the recommendations contained herein will be profitable or that they will not result in losses. Readers using the information contained herein are solely responsible for their actions. Information is obtained from sources deemed to be reliable but is not guaranteed as to accuracy and completeness.

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