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

On Tuesday, in the first half, the Nifty index traded in a narrow range of 100 points, but in the afternoon trade, a sharp decline was witnessed. From the high of Rs 18124.15, the index has lost 161 points and closed below the 18000 mark. The price action has formed a bearish candle carrying a lower low and a lower high. The overall advance-decline was tilted in the favour of the decliners.

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

Greaves Cotton: The stock has formed Shooting Star like candlestick pattern as of June 24, 2021, and thereafter witnessed correction. The correction is halted near the 50% Fibonacci retracement level of its prior upward move (Rs 66-Rs 184.40) and it coincides with the 50-week EMA level. The stock has formed a strong base near the support zone for 12-weeks.

On Tuesday, the stock has given a breakout of a downward sloping trendline resistance on the daily chart. This breakout was confirmed by robust volume. In addition, the stock has formed a sizeable bullish candle on breakout day, which adds strength to the breakout. The bullish candle formation has come along with a rise in the daily range. The last 10-days average is 5.70 points whereas Tuesday’s range was almost 17.15 points.

The Relative Strength Index (RSI), which is a momentum indicator in the weekly timeframe, surged above the 60 mark for the first time after July 15, 2021. The weekly RSI has also given positive crossover. Moreover, it has also given the buy signal in Martin Pring’s long-term KST set-up. On the daily timeframe, ADX is 14.02 which suggests that the trend is yet to be developed. Directional indicators continue in the ‘buy’ mode as +DI continues above –DI.

The technical evidence indicates a strong upside in the coming days. On the upside, the level of Rs 155, followed by Rs 162 will act as minor resistance for the stock.

Cyient: Considering the daily chart, the stock is trading in a rising channel since January 2021. On Tuesday, the stock has bounced exactly from the edge of the lower trendline of the rising channel. The rising trendline support was confluence with the 50-day EMA level. The reversal from trendline support was further justified by a relatively higher volume. Further, on Tuesday, the stock has surged above its 20-day EMA level.

The momentum indicators and oscillators are also supporting the overall bullish price structure. The leading indicator, 14-period RSI has taken support near upward sloping trendline support and given bullish crossover, which is a bullish sign. The daily stochastic has also given bullish crossover.

Considering the above factors, we expect the stock to test levels of Rs 1200 followed by 1290 levels. On the downside, the 50-day EMA will act as strong support for the stock, which is currently placed at the Rs 1079 level.