By Nandish Shah HDFC Securities
By closing above the 10208 level on Monday, the Nifty has confirmed higher top and higher bottom formation on the daily charts for the first time since the correction, which started from January 2018.
The Nifty has also given a breakout from small bullish Inverse head and shoulder on the daily charts. The target for this pattern comes at 10500 odd levels. The Nifty also managed to close above its 200-day SMA which is currently placed at 10183 level.
Moreover, Nifty has already witnessed a fall of almost 11 percent from the all-time high of 11171 registered in January 2018 to the recent bottom of 9951.
The Nifty Midcap and Smallcap indices plunged 16% and 21% respectively from the all-time high to recent low. Many stocks have seen a fall of than 40% from their 3-month’s high.
Few oscillators like RSI and KST have formed positive divergence. This means price levels were making lower bottoms and oscillators were making higher bottoms, indicating that dominance of bears is gradually going down.
Moreover, many stocks from midcap and small-cap segment look extremely oversold on charts and pullback from these levels is expected to continue.
From the derivative side, we are starting the April series with lower Stock Futures’ Open Interest (Four month Low) which in turn indicates lower leveraged positions, which Augurs well for the markets for the days to come.
Amongst the Options, Highest put writing is seen at 10000 level indicating 10000 level to act as a strong support for the coming days.
Considering the evidence discussed above, our advice would be to accumulate long positions with the stop loss of 10000 levels with a target of 10500 levels.
Hindustan Oil Exploration: BUY | Target: Rs 128 | Stop loss: Rs 110 | Return 11%
After forming triple bottom around Rs 100 levels, HOEC reversed northwards to close above its 5 and 20-DMA with higher volumes. The stock price is also making higher top higher bottom formation on the daily chart, Indicating bullish trend. It is also on the verge of giving bullish trendline breakout by closing above the downward sloping trendline, adjoining the highs of January 12, 2018 and March 22, 2018.
The momentum indicators and oscillators like MACD and RSI are also showing strength in the stock. Therefore, we recommend buying HOEC for the upside target of Rs 128, keeping a stop loss below at Rs 110.
Disclaimer: The author is Technical & Derivatives Analyst at HDFC Securities. The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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