Random Ramblings - Are bulls coming back?

Strength of every market is judged on corrections. After Monday’s turnaround it is important to observe that if the recovery turns out to be sluggish and market starts to give up gains, will it find support around 8,200 or not? As of now, it will act as a new support line for the bulls.

May 19, 2015 04:05 IST IIFL Pritesh Mehta |

The wait is finally over: After failed attempts of last three weeks to reclaim 8,350, Nifty finally broke through that barrier on Monday’s trade. It also resulted in a breakout from a bullish H&S pattern. What market will really enjoy is follow through buying on Tuesday.
 
In our post dated 16th May 2015, we mentioned that a move above 8,350 could lead to a reversal in trend. Now what we require is a follow-up buying, which could help the bulls maintain control above not only 8,350 but also 200-DMA. 
 
Good times ahead
 
Strength of every market is judged on corrections. After Monday’s turnaround it is important to observe that if the recovery turns out to be sluggish and market starts to give up gains, will it find support around 8,200 or not?  As of now, it will act as a new support line for the bulls.
 
Participation from index heavyweights and leadership sectors could aid Nifty in staying above 8,350 levels.  
 
After Monday’s stellar rally, Nifty is well positioned to test its 100-DMA placed around 8,540.
 
Strong uptrending stocks tend to find support at lower levels and also provide a strong rally. Infosys has held on to its horizontal support line which is in place since December 2014. Bullish consolidation for last one month is suggesting that the worst is now over and the IT bellwether could provide strong support to the market.
 
Daily chart of Infosys
 
Strong bottoming out candidate - Wipro: After having a horrendous time in March and April, Wipro has gone through sideways consolidation in May so far. A move above Rs545 could see the stock breaking out from this phase of consolidation. Watch the action in this space.
 
Daily chart of Wipro
 
Monday’s headlines were dominated by the performance of largecaps. However, one should not forget the swift recovery posted by CNX Small cap index and CNX Midcap index in last two weeks.
 
After a failed breakout in April 2015, CNX MidCap index went through sharp correction. However, decline got arrested around its 200-DMA. Thereafter it registered a breakout from a downward sloping trendline, suggesting that momentum is likely to continue going forward.
 
Daily chart of MidCap index

From the midcap space, KRBL looks interesting. It is in a strong uptrend since October 2013. Even during turmoil in the markets, it was largely unaffected. It just went through sideways correction in April, only to find support at its rising trendline. Thereafter it has been consolidating in a triangle pattern before attempting a breakout in yesterday’s trade. A move above Rs172 could provide a sharp upmove in KRBL.
 
Daily chart of KRBL
 
Entire tyre space was buzzing. However, CEAT looks compelling from the pack.
 
CEAT had been struggling after making a peak of Rs1,010 in November 2014. Sideways correction brought the stock to a low of Rs705 in last week’s trade. After six months of underperformance, CEAT found support at its 50-WMA before providing a sharp pullback on Monday. So it could turn out to be a trend reversal counter.
 
Weekly chart of CEAT
 
 The author is Senior Technical Analyst, IIFL

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