Nifty may retest its all-time high level. 3 stocks to lead the rally

November 2024 has been quite an eventful month, both globally and domestically. From the US election results and the US Federal Reserve's interest rate cut to our very own state elections, the market has been a bit of a rollercoaster. Throughout this period, the Indian market, especially the Nifty 50, has been somewhat of an underperformed.

After hitting an all-time high of 26,277, Nifty corrected by about 11.37%, dipping to 23,263 in just 36 trading sessions. Meanwhile, global indices like the Dow Jones, gold, crude oil, and the Shanghai Index have performed better, as shown in the image below.

But here's the million-dollar question: Has Nifty reached its bottom, or is this just another dip before the next big rally?

Let’s look at the Nifty 50 from a technical standpoint.

Price Action & Key Levels

At this juncture, a few key observations stand out when we examine Nifty’s daily price chart through classical price action analysis:

⦁ Support at the Lower Band of the Mid-Term Rising Channel: Nifty has found support at the lower band of its mid-term rising channel, which has been intact since November 2023.

⦁ 200-SMA Test: The price has recently tested its 200-day simple moving average (SMA) for the first time since May 2023. This is a key support level, as the 200-SMA is often considered a long-term trend direction indicator.

⦁ Support at 23,340: On the day of the 2024 Lok Sabha election results, Nifty hit a high of 23,340, now an important support level.

⦁ RSI Bullish Divergence: The 14-period RSI (relative strength index) shows a bullish divergence, suggesting that momentum is building from oversold levels.

A few more observations suggest that Nifty50 is set to re-test its all-time high level of 26,000.

⦁ In November 2023 Nifty hit a bottom around 18,837 and made a one-side rally towards 26,227. We are applying Fibonacci retracement tool, it showing us that price reverse from important level 38.20% placed at 23,435.46.

⦁ Recent fall on Nifty50 daily chart from all-time high. It has formed falling wedge which bullish reversal pattern. During this time we can see the 14 period RSI has formed 2 bar bullish divergence.

Stock Watchlist: 3 large-cap stocks to focus on the Nifty reversal

Given this technical setup, we are expecting Nifty to potentially retest its all-time high. So, as Nifty moves towards its next rally, here are three large-cap stocks that could participate in the upcoming move. These stocks have shown resilience during recent corrections and could be solid picks as we move forward.

Also Read: Can these three breakout stocks help you beat the stock market selloff?

Eicher

Eicher Motors has been consolidating since April 2024, and recently, in November 2024, the stock tested its long-term 200-day moving average. The price has given a breakout from its short-term falling trendline, with a noticeable rise in volume. This indicates that the previous fall lacked strength, and now the stock seems ready for an upward move. A break above the ₹5,000 mark could potentially signal the next leg of the bull run. On the downside, ₹4,500 remains a support level.

Infosys

Infosys, a major player in the IT sector, has been on a steady upward trajectory since June 2024, delivering a solid 45% return from June to September. While the stock has entered a consolidation phase since then, it has remained well above its key moving averages, demonstrating inherent strength.

Despite the broader market correction, Infosys has held its ground. The stock is now breaking out from a consolidation zone and an inverted head-and-shoulders pattern, which is often seen as a bullish reversal. As long as the ₹1,800 support level holds, Infosys could potentially deliver strong returns in the near future.

ITC

FMCG stocks like ITC, HUL, and Marico have been hammered by inflationary pressures in recent months. However, ITC seems to be finding its feet once again. The stock has taken multiple supports around its 200-day moving average (DEMA) and a falling trendline connecting the previous two swing highs.

A bullish divergence is also visible on the 14-period RSI, and the stock has recently broken out from its falling channel. This makes ITC an intriguing pick for those looking for a potential turnaround story. If the price stays above the ₹400 level, we could see a potentially significant move upwards in the coming months.

So, what’s next?

We have discussed Nifty’s technical setup, and the outlook appears promising. If Nifty does indeed retest its ATH of 26,000, we can expect large-cap stocks to outperform, as we have seen in the previous cycles. The three stocks mentioned—Eicher Motors, Infosys, and ITC—have potential to benefit if the market rallies.

For more such analysis, read Profit Pulse.

Note: The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.

As per SEBI guidelines, the writer and his dependents may or may not hold the stocks/commodities/cryptos/any other assets discussed here. However, clients of Jainam Broking Limited may or may not own thesesecurities.

Kiran Jani has over 15 years of experience as a trader and technical analyst in India's financial markets. He is a well-known face on the business channels as Market Experts and has worked with Asit C Mehta, Kotak Commodities, and Axis Securities. Presently, he is Head of the Technical and Derivative Research Desk at Jainam Broking Limited.

Disclosure: The writer and his dependents do not hold the stocks discussed here. However, clients of Jainam Broking Limited may or may not own these securities.

Also Read: Top three IT stocks to watch out for in this bull market