INDIA

FORTNIGHTLY
10 May, 2020

Gautam Shah (CMT, CFTe, MSTA)

[email protected]
Bears Writing On The Wall ! For Subscribers Only
 Nifty - Setting Up For A Breakdown
The index witnessed a spectacular recovery from 7500 to 9900 levels. Market Indices
Every characteristic of the recovery had a bear market relief rally
written all over it. Since the market saw an "excessive" move on the Sensex 31642
downside in March, the recovery was equally extended. From close to
our mentioned best-case level of 10K the Nifty has come off 800 points Nifty 9251
and now seems to be on the verge of a fresh breakdown. We get a
confirmation on a close below the 9140-9175 area. Once done, expect Medium-Term Trend Down
the index to move down to 8820, stopover for a bit and then head
towards 8360. 9350-9500 now looks like a wall of resistance that will be 52-Week Range 7511 - 12430
difficult to cross. This expected decline might not be broad-based. It
India VIX 38.41
could be restricted to the popular large-cap sectors like Banking, Capital
Goods, Auto, Metals, FMCG and IT. The mid-caps could relatively
outperform along with Healthcare. It is advisable to stay light on
leverage positions on the long side and also hedge for long-term Sector Preferences
investors. India VIX could have seen a new base around 30 and is likely
to start perking up again. US and many other equity markets around the BSE Healthcare 
world are at their respective resistances. We see a turnaround coming
there as well. Gold continues to be a "safe haven" play. NSE Bank Nifty 
 Bank Nifty – In 2nd Leg of Bear Market NSE Auto 
The Bank Nifty barely managed to get past the late Mar '20 high on the
F&O expiry day in April '20. Since then it has abruptly looked weak and
again started to underperform. The triggers remains bearish. A break of
the 19000-19100 support area could confirm a large pattern breakdown Stock Monitor
that could lead it down to 18000/17100 and eventually 16000. This
could derail the entire market set-up. Resistance seen at 20000-300. Bharti Airtel

 The May Seasonality – Big Move Coming

History tells us that the month of May is usually trending in nature. Last
week was quiet as the Nifty stayed in a range but from the coming
week it seems that a trending move could begin. The high of last week
(9533) could now be a ceiling. If all goes as per plan, a 5-7% move on
the downside can't be ruled out. Option buyers have an opportunity
coming while option sellers need to be careful.

 Bharti Airtel – All Good Signals

The stock is one of the safest names to go long in the current market
set-up. It has seen a gradual recovery from the lows with consolidation
at regular intervals. We see the uptrend continuing in the coming
weeks and it could take the stock to a level of 600 and beyond.

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WEIGHT OF EVIDENCE

PATTERN SCREENING Exhibit 1

The market action in the last few weeks has been all over - NS E50 [NIFTY] (9,287.35, 9,298.45, 9,238.20, 9,249.50, -37.7500) 10250
10200
10150
10100
10050

the place. The movements have been haphazard without a

10000
9950
9900
9850
9800
9750
9700

trend. Also, while the Nifty rallied from 7500-9900 we did 9650
9600
9550
9500
9450
9400

not see any reversal pattern formations and that gave us

9350
9300
9250
9200
9150
9100

the hint that it was NOT a reversal for good. Now factoring
9050
9000
8950
8900
8850
8800
8750

in the data of the last one month a new "Head & Shoulder
8700
8650
8600
8550
8500
8450

Top" pattern (See Exhibit 1) can be seen on the charts (60-

8400
8350
8300
8250
8200
8150
8100

min). The neckline to this pattern is around 9150. Once

8050
8000
7950
7900
7850
7800

violated the index could see a 600-800 point drop towards

7750
7700
7650
7600
7550
7500
7450

the working target of 8360 with stopover at 8820. Major

7400
7350
7300

16 17 18 19 20 23 24 25 26 27 30 31 1 3 7 8 9 13 15 16 17 20 21 22 23 24 27 28 29 30 4 5 6 7 8 9 10
April May

resistance now seen around the 9400 level.

INDICATOR SCREENING Exhibit 2

We do not see any major positive triggers on the technical Rel at ive S trength Index (42. 6902) 100

95

90

85

indicators. Despite a large 27% rally from the lows the

80

75

70

65

60

55

daily RSI was not able to test the overbought line. This is 50

45

40

35

30

more negative than anything else. The weekly RSI had

25

20

15

10
k 5

tested a new life low during the Mar '20 fall that only
0

12500

weakens the medium-term set-up. The daily MACD study

12000

11500

11000

is back up from the lows and is currently around the zero 10500

10000

line where resistance is seen. The DM/ADX study on the 9500

9000

weekly chart is currently in "halt mode". Note, this study 8500

8000

has been in trending sell mode for many weeks now. The March Apri l May June July August Septem ber October Novem ber 2018 February March April May June Jul y August Septem ber Novem ber Decem ber2019 February March Apri l May June July August Septem ber Novem ber Decem ber2020 February March April May June July
7500

chances of this study getting back into sell mode in the

near term is quite high.

OSCILLATOR SCREENING Exhibit 3

No real positive triggers on the oscillator studies as well. Stochast ic Oscill at or (82.7680)
100
95

90
85
80

The key takeaway is the fact that the weekly Stochastic

75

70
65
60

55
50

oscillator (5-period) has moved back into the overbought

45

40
35
30

25
20

zone after the recovery of the last few weeks. If this is a 12800
15

10
5

12700
12600

bear market, the study is unlikely to stay in that zone for

12500
12400
12300
12200
12100
12000
11900
11800
11700
11600

long. Infact this study tells us that the room for upside is
11500
11400
11300
11200
11100
11000
10900
10800
10700
10600

limited while the downside potential is large. On the daily

10500
10400
10300
10200
10100
10000
9900
9800
9700
9600
9500

charts, the studies are mostly neutral with no major

9400
9300
9200
9100
9000
8900
8800
8700
8600
8500

triggers.
8400
8300
8200
8100
8000
7900
7800
7700
7600
7500
7400
7300
7200
7100
20 27 3 10 17 24 31 7 14 21 28 5 12 19 26 2 9 16 22 30 7 14 21 28 4 11 18 25 1 8 15 22 1 8 15 22 29 5 12 18 26 3 10 17 24 31 7 14 21 28 5 12 19 26 2 9 16 23 30 6 13 20 27 4 11 18 27 1 8 15 22 29 6 13 20 27 3 10 17 24 1 7 14 20 28 6 13 20 27 3 9 17 24 30 8 15 22 29 5 12 19 26 3 10 17 24
August Septem ber October Novem ber December 2019 February March April May June Jul y August S eptember October Novem ber December 2020 February March Apri l May June July

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WEIGHT OF EVIDENCE

The May Seasonality - Important Exhibit 4

In our Big Picture report we explained in detail about the
* CNX NI FTY (9,376.95, 9,382.65, 9, 238. 20, 9,251.50, +52.4502)
12800
12700
12600
12500
12400
12300

importance of the month of May. This month has the

12200
12100
12000
11900
11800
11700

seasonal tendency to trigger large trending moves and this

11600
11500
11400
11300
11200
11100
11000

has been seen multiple times in the last 2 decades. Usually 10900
10800
10700
10600
10500
10400

the moves are between 5-15%. Now last week has been
10300
10200
10100
10000
9900
9800

extremely quite as we got into May and now there are

9700
9600
9500
9400
9300
9200

indications of the action picking up from this week. We

9100
9000
8900
8800
8700
8600
8500

think the high of last week (9533) could be the ceiling for 8400
8300
8200
8100
8000
7900

the near term. The market is on the verge of a breakdown

7800
7700
7600
7500
7400
7300

and if it gets confirmed expect quality action for the next 3

7200
7100

March Apri l May June Jul y August Septem ber October November December 2019 February March April May June July August Septem ber October November Decem ber 2020 February March April May

weeks. Stay prepared. Stay hedged.

The Long-Term Moving Average Signal - SELL Exhibit 5

We like to work closely with the moving averages on all
* CNX NIFTY (9,533.50, 9,533.50, 9,116.50, 9,251.50, -608. 400)
12800
12700
12600
12500
12400
12300

time frames. Here we are using the ST average (13-day)

12200
12100
12000
11900
11800
11700

and the long-term average (240-day) and plotting it on the

11600
11500
11400
11300
11200
11100
11000

weekly Nifty chart. For the first time in 10 years the ST 10900
10800
10700
10600
10500
10400

average has pierced the LT average from above and it is a

10300
10200
10100
10000
9900
9800

bearish development. In the last 20 years this signal has

9700
9600
9500
9400
9300
9200
9100

worked wonderfully. With this sell trigger and with the 9000
8900
8800
8700
8600
8500

moving averages all clustered around 9800-10000 we

8400
8300
8200
8100
8000
7900

think the best of the recovery could be over. This sell

7800
7700
7600
7500
7400
7300
7200

trigger could remain in existence for many weeks to many Apri l May June July August Septem ber October November 2018 February March April May June July August S eptember Novem ber Decem ber2019 February March Apri l May June July August Sept em ber November Decem ber2020 February March April May June July
7100
7000

months and suggests all rallies should be sold into. This is

an important development from investors point of view.

Bank Nifty - Could Take The Market Down Exhibit 6

As explained many times in the past the Bank Nifty usually Rel at ive S trength Index (32. 7826) 85

80

75

70

leads from the front whether on the way up or down. It 65

60

55

50

has underperformed recently and is on the verge of a 45

40

35

30

breakdown on the charts. Many technical triggers are 25

20

15

34000

already weak. A break below the 19000-19100 area could 33500

33000
32500
32000
31500
31000
30500

confirm a breakdown from a large pattern and trigger an 30000

29500
29000
28500
28000
27500

almost 3000-point fall back to 16000 levels. This could

27000
26500
26000
25500
25000
24500
24000
23500

take the entire market down with it. The coming week is 23000
22500
22000
21500
21000
20500

crucial as this confirmation could come by. Resistance

20000
19500
19000
18500
18000
17500
17000

seen in the 19900-20300 area. Almost all stocks in the

16500
16000
15500
15000

2017 February March Apri l May June July August Septem ber October November 2018 February March April May June July August S eptember November Decem ber2 019 February March April May June July August S eptember Novem ber Decem ber2 020 February March April May June Jul y

sector could be under pressure. Shorting opportunities.

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 INDIA FORTNIGHTLY

Bharti Airtel (Rs.530) – All Good Signals BUY

BUY

Entry Zone 515-530 Target 600 & 660 Potential Return 14% - 25%

 After a long period of underperformance the stock started a mega uptrend in 2019 that has not found any major
hurdle in the last one year. The fall last month was large and sharp but the recovery has been equally sharp
 The recovery from the recent low has been as good as it can get. Low on volatility, high of volumes during an uptick
and we see a clean series of higher tops and higher bottoms
 This recovery should take the stock back to 570 where some selling pressure could be seen. However we do not see
any major correction from the same. The chances of a fresh breakout are quite high
 Given the cues from the price action, technical indicators and the moving averages it seems that the stock could
move towards a level of 600 before any major correction is seen
 We do see market weakness in the next few weeks but expect this stock to outperform. We advise accumulating the
same in the 515-530 zone. Strong support is seen in the 480-500 area
 Support: 500 and 480 Resistance: 551 and 570

STRATEGY: Buy in the region 515-530 with a stop loss below 470 for a medium-term target of 600 and 660

Exhibit 7
DR.Relative
REDDY' GMM PFAUDLR
ICICI LOMBARD GENERAL
SAIRTEL (2,330.00,
Relative
INSURANCE
LABS (3,166.45,
BHARTIStrength 2,855.00,
Strength
COMPANY
3,205.95,
Comparative(*
(540.000, Index2,260.00,
(1,342.00,
3,113.00,
CNX528.300,
545.800, 2,782.10,
(57.4029)
1,354.90,
NIFTY) (0.056922,
530.050, +61.7002)
1,315.90,
3,191.20,+2.00000)
+24.5000)
+0.001292) 1,339.45, -10.0500) 46003700
RELIANCE ENERGY (603.000, 614.800, 596.050, 604.950, +5.70001) 75
45503650
585
1450
45003600
580
70044500.070
3550
70575
4400
3500
0.065
570
4350
1400
43003450
65565
42500.060
3400
650 560
42003350
555
4150
60
0.055
3300
1350550
4100
3250
4050 545
0.050
3200
55
6004000 540
39503150
0.045
535
1300
39003100
50530
38503050
0.040
3800 525
3000
5503750
45520
2950
0.035
3700
1250
2900
3650515
0.030
2850
40510
3600
870
5003550 2800
505
860
3500
12002750
500
850
3450
35
2700
840
3400495830
2650
3350490820
4503300 2600
30 810
1150 485
32502550
800
480
790
32002500
3150 780
475
3902450
770
3100
385 470
11002400
760
3050
380 750
465
500003000 2350
375 740
460
29502300
730
x100 370455
29002250
720
September October November December 2005 February March April May June July August September October November December 2006 365 710
1050
2850 450
2200
360
2800 700
2150
445
690
355
2750
3502100
680
440
Source: Goldilocks Premium Research 2700
1000
340
2600
670
2050
345435
2650 660
2000
430
650
335
2550 640
1950
425
330
2500 630
1900
420
620
2450
325
950
1850
610
320415
2400
600
1800
2350
315410

Exhibit 2 2300
310405
2250
590
1750
580
1700
900570
305
2200 400
560
1650
300
2150 550
395
2951600
2100 540
RELIANCE ENERGY (603.000, 614.800, 596.050, 604.950, +5.70001) 290 390
1550
530
2050
285
850 520
385
1500
2000
700280 510
380
19501450
275 500
1900 375
1400
490
270
1850 480
1350
370
265
800470
18001300
260365
6501750 460
2551250
450
360
1700
250 440
1200
1650355430
2451150
750
13000350 420
600240 1100
410
345
235
12000 400
1050
230 340
390
11000 1000
380
700335
225
950
370
550 220330
10000 360
900
215 350
325
210850
9000 340
320
650800
330
205
8000
500200 320
65000
750
60000
7000 310
195700
300
55000
190 650
50000
290
6000
600
185
45000
280
4505000 40000
180 270
20000
35000
260
175
30000
4000 250
15000
170
25000
240
165
20000
3000 230
10000
20000
15000
160 220
50000 1000010000
20005000
155 210
x1000
x1000
18x100 150 200
x10
251000
17 2910
24 17 1 244 8 1 815 15 11
22 18
22 29 29 5 5 1212 19 19252626 3 3 102 10 17 2417 31924 7 31 14 7 16
21 14
23 30
28 421 1128 18 4 25 11
6
5 1118 18 2525 51 11
13
8 18 2520
15
27 3
30 1 138 20 152722 3 3010 6 17 1324 20
10
1
17 24
827 153 2210 29 175 24
2 9 16
13 1 26 8 3 915 16 22 23 2930 75 14 132219 29 26
23
4 3 30 189 2516 7 2 23 9 133016 7 23 20
11 14 27 4 11
30 622 1329 204 27 11 3 18 10 25 17 224 29 9 1616 23 23 x1000
30
Feb May
Mar November
September
June
October
Apr July
May JunAugust October
September
November
Jul Aug Sep November
November
Oct December
December
Nov 2017
Dec December
February
2017 2019
Feb April
Mar 2005
May
Apr June
May February
Jun 2020
February
July Jul August
Aug March
September
March
Sep Oct November
Nov DecAprilApril
2018
2018 February
Feb Mar February
May
May Apr AprilMay MayJun June
June June
Jul July
Aug August
Sep July March
September
Oct July Nov August
November
Dec December
2019 Feb 2019
August
Mar September
February
Apr May April April
September
Jun October
MayJul June
Aug July
October
Sep November
August
Oct NovSeptember
November
Dec May
December
2020November
Feb 2006
December
Mar 2020
December
Apr February
May Jun
September
Nov Dec 2016 October Feb Mar November
Apr May Jun December
Jul Aug Sep 2019Oct Nov Dec February
2017 Feb Mar March
Apr May Jun April Jul Aug Sep May Oct Nov Dec June 2018 Feb Mar July Apr May Jun AugustJul Aug September
Sep Oct Nov October
Dec 2019 Feb Mar November Apr May December
Jun Jul Aug 2020 Sep Oct Nov February
Dec 2020 Feb March
Mar Apr

Source: Goldilocks Premium Research

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