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

The benchmark index Nifty gained 52.45 points or 0.29% on Tuesday. The price action has formed a bullish candle carrying higher high and higher low which indicates a continuation of the uptrend. The leading indicator, 14-period daily RSI has surged above its prior swing high. The Nifty Midcap 100 and Nifty SmallCap 100 has ended flat. Despite the positive closing of benchmark indices, the advance/decline ratio is tilted in favour of bears.  

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

Tata Chemicals: The stock has formed a shooting star-like candlestick pattern as of October 18, 2021, and thereafter, witnessed a correction. As of November 29, 2021, the stock had formed a swing low of Rs 828.80, where it formed a reversal spinning top candlestick pattern and thereafter, the stock prices rebounded to touch the level of Rs 952. However, the stock failed to sustain at higher levels and again witnessed a correction but the bears were not able to push the prices much lower, and thus, the stock registered an almost identical bottom as of December 20, 2021. This resulted in the formation of the Adam and Adam double bottom pattern.

On Tuesday, the stock has given neckline breakout of Adam and Adam double bottom pattern on the daily chart. This breakout was accompanied by robust volume. With this, the leading indicator, 14-period daily RSI has also given double bottom pattern breakout, which is a bullish sign. The daily RSI surged above the 60 mark for the first time after October 21, 2021. The short-term moving averages are edging higher. The MACD histogram is suggesting a pickup in upside momentum.

In a nutshell, the stock has registered a bullish pattern breakout along with volume confirmation. As per the measure rule of Adam and Adam double bottom pattern, the upside target is placed at Rs 1080 level. On the downside, the 20-day EMA will act as major support for the stock.

Fineotex Chemical: The stock has formed a Spinning Top candlestick pattern as of December 15, 2021, and thereafter witnessed minor throwback along with low volume. The throwback is halted near the 50-day EMA level. During the period of throwback, the stock has formed a symmetrical triangle pattern on the daily chart.

This breakout was supported by a robust volume of more than seven times of 50-days average volume, indicating strong buying interest by market participants. The 50-days average volume was 10.57 lakh while on Tuesday the stock has registered a total volume of 80.12 lakh.

With this triangle breakout, the ADX, which shows the strength of the trend, turned upside and moved above the -DI. As the stock is trading at its all-time high level, it is trading above all the crucial moving averages. These averages are in the desired sequence, which suggests the trend is strong. The stock's Relative Strength Index (RSI) has reached its highest value in the last 14-days, which is bullish.  

 Technically, all the factors are currently aligned in support of the bulls. Hence, we would advise the traders to be with a bullish bias. As per the measure rule of the symmetrical triangle pattern, the upside target is placed at Rs 166 level. On the downside, Tuesday’s low of Rs 137, will act as immediate support for the stock.