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

The benchmark index Nifty has continued its southward journey for the second consecutive trading session. On Wednesday, the Nifty index has closed below the 18000 mark. The price action has formed Three Outside Down candlestick pattern. This pattern represents the confirmation of the Bearish Engulfing pattern, and can only show the success of the forecast of the appropriate Bearish Engulfing pattern. Along with this bearish formation, the index has also slipped below its 8-day EMA and 13-day EMA level. These averages are started edging lower, which is a bearish sign.

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

VLS Finance: The stock has formed a Shooting Star candlestick pattern as on the weekend of July 30, 2021, and thereafter witnessed correction. During this corrective phase, the volume was mostly below the 50-week average volume, which suggests its routine decline after a robust move. The correction is halted in between 38.2% to 50% Fibonacci retracement level of its prior upward move.

On Wednesday, the stock has given a breakout of a downward sloping trendline resistance on the daily chart. Since the last two trading sessions, the volumes recorded were above 50-week average, which is a sign of accumulation. With this trendline breakout, the ADX, which shows the strength of the trend, turned upside and moved above the -DI.

Currently, the stock is comfortably placed above its key moving averages i.e. around 13% and 31% from 50-day EMA as well as 200-day EMA, respectively. This shows strength in the stock. The leading indicator, 14-period daily RSI has also given flat trendline breakout on the daily chart and on the weekly chart it has given bullish crossover.

Technically, all the factors are currently aligned in support of the bulls. Hence, we would advise the traders to be with a bullish bias. On the upside, the level of Rs 255, followed by Rs 265 will act as resistance for the stock.

BSE: After registering the high of Rs 2373.70, the stock has witnessed correction. The correction is halted near the 61.8% Fibonacci retracement level of its prior upward move (Rs 1425.55-Rs 2373.70) which coincides with the 34-day EMA level.

The stock has formed a doji candlestick pattern near the support zone and started marking higher tops and higher bottoms. On Wednesday, the stock has gained over 5%. The price action has formed a sizeable bullish candle along with above 50-days average volume, which is a bullish sign. Currently, the stock is trading above its short and long-term moving averages. These averages are in a rising trajectory.

Interestingly, the leading indicator, 14-period daily RSI has taken support near the 60 mark and surged above its prior swing high, which suggest the stock is in the super bullish zone as per RSI range shift rules. 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.

Based on the above observations, we expect the stock to continue its upward movement and test its all-time high level of Rs 2373.70 level. On the downside, the 20-day EMA will act as strong support for the stock.