Chart Busters: Top trading set-ups to watch out for Monday

In the last four trading sessions, the benchmark index Nifty has lost 638.60 points or 3.49%. On the weekly chart, the price action has formed a sizeable bearish candle. On Friday, the index has slipped below its 50-day EMA level. Further, the short-term moving averages, i.e. 20-day EMA and 50-day EMA has started edging lower, which is a bearish sign. On the weekly chart, the RSI has given a bearish crossover and it is in falling mode. On Friday, the advance-decline ratio was strongly in the favour of decliners. The Indian Volatility Index (VIX), a gauge for the market’s short-term expectation of volatility, surged by over 6% to end at an 18.89 level.

Here are the top trading set-ups to watch out for Monday.

GRP: On January 05, 2022, the stock has given symmetrical triangle breakout and thereafter witnessed 46% upside in just three trading sessions. After registering the high of Rs 1572.85, the stock has witnessed minor throwback along with relatively lower volume. During the period throwback, the stock has formed Bullish Pennant pattern on the daily chart.

On Friday, the stock has given a breakout of the Bullish Pennant pattern on the daily chart. The bullish pennant pole height is almost 500 points. This breakout was confirmed by robust volume. In addition, the stock has formed a sizeable bullish candle on the daily chart. As the stock is trading at its 52-week high, it is trading above its short and long-term moving averages. Daryl Guppy’s multiple moving averages is suggesting a bullish strength in the stock. Further, the stock is meeting Mark Minervini’s trend template rules. These two set-ups are giving a clear uptrend picture in the stock.

The leading indicator, 14-period daily RSI is in a super bullish zone and it has given bullish crossover on Friday. The daily MACD stays bullish as it is trading above its zero line and signal line. The MACD histogram is suggesting a pickup in upside momentum. The stock is clearly on an uptrend and trend strength is extremely high. The Average Directional Index (ADX), which shows trend strength, is as high as 54.27 on a daily chart and 43.08 on a weekly chart. Generally above 25 levels considered as the strong trend. In both time frames, the stock is meeting the criteria.

In a nutshell, the stock has registered a bullish pattern breakout along with volume confirmation. As per the measure rule of the bullish pennant pattern, the upside target is placed at RS 1790, followed by Rs 2000 in the near term.

Texmaco Rail & Engineering: Considering the daily chart, the stock has given neckline breakout of Eve and Adam double bottom pattern and thereafter witnessed 32% upside in just 7 trading sessions. After registering the high of Rs 42.80, the stock has witnessed a minor throwback. The throwback is halted near the 38.2% Fibonacci retracement level of its prior upward move and it coincides with the 8-day EMA level.

The stock has formed a base near the support zone and resumed its northward journey. The reversal from the support zone is further justified by robust volume. Interestingly, during the period of the throwback, the leading indicator has not slipped below the 60 mark, which indicates range shift as per RSI range shift rules.

The other momentum indicators and oscillators are also supporting the overall bullish price structure. The stochastic has given bullish crossover and MACD is staying bullish as it is trading above its zero line and signal line. Pring's KST has given a fresh buy signal on the daily chart.

Based on the above observations, we expect the stock to continue its upward movement and test levels of Rs 43, followed by Rs 50 in the short term. While on the downside, the 8-day EMA will act as strong support for the stock.