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

On Monday, the benchmark index, Nifty has opened with an upside gap and marked the high of 18210.15 level. Thereafter, the index has lost nearly 120 points from the day high. The price action has formed a bearish candle with an upper shadow. The advance-decline ratio was in the favour of decliners.

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

Finolex Cables: The stock has formed a doji candlestick pattern as of July 14, 2021, and thereafter witnessed correction. During the correction, the stock has formed lower tops and almost similar bottoms. The correction is halted in between 50% to 61.8% Fibonacci retracement level of its prior upward move and it coincides with the 34-week EMA level.

On Monday, the stock has given a downward sloping trendline resistance breakout on the daily chart. This breakout was confirmed by nearly 10 times of 50-days average volume, indicating strong buying interest by market participants. The 50-days average volume was 2.49 lakh while on Monday stock has registered a total volume of 24.79 lakh. Additionally, the stock has formed an opening bullish marubozu candlestick pattern on breakout day, which indicates extreme bullishness.

The stock's Relative Strength Index (RSI) has reached its highest value in the last 14-days, which is bullish. Also, it has surged above its prior swing high. The weekly RSI has also surged above the 60 mark.
 

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 prior swing high of Rs 557.70 will act as resistance for the stock.

Pearl Global Industries: The stock has formed a long-legged doji candlestick pattern as of August 03, 2021, and thereafter witnessed correction along with low volume. The correction is halted near the 61.8% Fibonacci retracement level of its prior upward move (Rs 174.10-Rs 474.70) and it coincides with the 20-day EMA level. Since the last 55 trading sessions, the stock has formed a strong base near the support zone. During the formation of the base, the volume was mostly below the 50-day average volume.

On Monday, the stock has given downward sloping trendline breakout on the daily chart. The robust volume on breakout day is portraying an encouraging picture. Mansfield Relative Strength indicator is just bouncing from the zero line and showing the outperformance compared to the broader market index i.e. Nifty-500.

Along with this breakout, the stock has surged above its short-term moving averages, i.e. 20-day EMA and 50-day EMA. The short-term moving averages are started edging higher, which is a bullish sign. The leading indicator, 14-period daily RSI surged above the 60 mark for the first time after 65 trading sessions. On the weekly chart, the RSI has given a positive crossover.

Based on the above observations, we expect the stock to continue its upward movement and test levels of Rs 356 followed by Rs 379 in the medium-term. On the downside, the 20-day EMA will act as strong support for the stock.