Manish Srivastava
The bulls extended the gain in Nifty50 as the index escalated and closed near 10,400 mark. Even after the mild profit-booking during the week, the index managed to close with a gain of about 140 points on a weekly basis.
In the forthcoming week, the prices may enter into a phase of consolidation as there was a formation of "Bearish Engulfing" candlestick pattern on Wednesday's trading session. The big red candle completely engulfed the previous green candle that was followed by a small body candle and a 'Doji' pattern. This indicates that bulls are tired and could take a pause for a time being and we could see the Nifty to trade within the range of 10,550 to 10,020.
Recently, the index has traded the resistance of the gap area (10,350) on the higher side. Gap down opening was witnessed in the index on March 12, 2020. Since then, the market was struggling to fill the gap and the pullback rally fizzled out twice at the resistance area in the last three months. Recent breakout has changed the scenario to some extent and now the levels of 10,050 -10,020 will act as a short term base for the index. The 20-day simple moving average is also placed in the same area which is likely to provide a cushion to the prices on every dip. It acts as equilibrium for prices in the short term and sentiments driven sharp move generally settle near this average before entering into a new zone.
Extension of the ongoing rally can be expected only if the recent high of 10,553.15 trades on the higher side on a closing basis. As momentum indicators are trading in a bullish zone and prices are trading above the major medium term moving averages, the 'Bearish Engulfing' pattern could keep the prices sideways for a few trading sessions. Eventually, we could see much higher levels in the near term. Index traders can wait for consolidation or mild retracement to enter long and expect the bias to be on the positive side until the prices are trading above 10,020 levels.
Meanwhile, individual stocks would keep providing lucrative trading opportunities. We have identified three stocks which are likely to outperform the Nifty in the short term and could offer 7 to 12 percent returns.
Bajaj Auto: Buy | CMP: Rs 2,867.60 | Target: Rs 3,150 | Stop loss: Rs 2,710 | Return: 10 percent
The stock has started trading with higher top and higher bottom formation on the daily chart and is looking poised for a fresh breakout. Recently, prices have taken support at a 50-day exponential moving average after a mild correction and bounced back sharply. Bullish flag breakout on the chart indicating that upside momentum is likely to continue in the counter. RSI is trading in a bullish zone and has bounced back from important support levels. Traders can initiate long positions in the counter with a short term perspective.
Cummins India: Buy | CMP: Rs 410.60 | Target: Rs 460 | Stop loss: Rs 380 | Return: 12 percent
The stock is showing signs of life after prolonged weakness. Momentum indicators have started trading in a positive zone and bullish crossover of major short term and medium term moving averages has taken place on the daily chart. The initial signal of trend reversal buying indicates that bulls are laying a foundation for a decent rally in the near term.
Traders can initiate long positions in the counter through a pyramiding strategy where partial buying can be done at current market price (CMP) and positions can be added once the stock starts trading above Rs 426. The smooth journey can be projected until Rs 465 in short and even higher in the medium term. Apart from this, breakout of a triangle formation pattern is making it a lucrative buying opportunity with decent risk-reward.
HDFC Life: Buy | CMP: Rs 541.90 | Target: Rs 580 | Stop loss: Rs 505 | Return: 7 percent
The stock is looking poised for a right angle triangle breakout. Base formation activity has been witnessed in the counter after a recent fall in the months of February and March. Momentum indicators are trading in a bullish zone with positive crossovers. RSI has started trading in the bullish zone for the first time after January 2020 and all these factors indicate that probable breakout can be expected in the counter. Traders can accumulate it at CMP and on any decline till Rs 520 with the perspective of short term gain.
The author is Technical Analyst (equity & currency) at Rudra Shares & Stock Brokers.
Disclaimer: 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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