Nifty has been consolidating around the 8,700-8,500 levels since past few weeks. The index has an immediate support at 8,500 which would act as a cushion in case of decline. The markets are likely to remain choppy until its break from the mentioned range. After a sharp uptrend, the Nifty declined from its recent highs and tested the crucial support area of 8,600. The index has an immediate resistance around the 8,720 which will be a crucial hurdle to be crossed immediately. There are emergence of negative divergence pattern on momentum indicator which indicates a halt in recent rally and the possible correction only on breach below 8500 levels. The index is still in an uptrend the rally is likely to see a sharp momentum on a break above 8,720 levels market which would take the index towards the all time highs of 9,100.
Bank Nifty last week exceed the resistance zone of 19,100-19150 levels decisively and is currently consolidating its gains. There is an immediate resistance at 19,450 levels and a close above would rally towards the 19,750-19,900. There is an immediate support at 19,100-18,900 levels on the downside. Bank Nifty on weekly charts has formed a bullish pattern and on the daily charts as it has managed to close above its recent swing high which confirms a higher high formation and a continuation of the uptrend.
The tyre stocks are likely to outperform in the near term and particularly MRF and JK Tyre have confirmed a short-term trend reversal and resumption of the original uptrend. The stock recently observed breakout from its recent consolidation patterns. The stock has been an outperformer in the markets as the RSC ratio has formed a higher high along with the price. The recent decline was corrective in nature as the prices have bounced from the oversold levels along with the reversal. The stock is likely to rally towards the new highs as the momentum indicators continue to remain positive.
Godrej Consumer Products recently topped around the 1,660 levels and the decent halted as the prices formed a Bullish Engulfing pattern near its long term averages. The MACD indicator is on verge of a positive crossover and the RSI after a positive divergence is trading in a bullish zone which indicates a possible trend reversal on cards and expect upside target of 1,650 and 1,700 levels.
(The author is Manav Chopra, CMT, head technical analyst at Monarch Networth Capital)