ABCD Harmonic, Inverse Head and Shoulder patterns signal Nifty may march towards 9,650

Banking Index has formed a higher high and higher low pattern which indicates a short-term bullish trend to continue.

April 27, 2020 / 07:56 AM IST
 
 
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Shabbir Kayyumi

Nifty consolidated in a tight range of 300 points throughout last week and saw a flat weekly closing. The index was going through a complex correction at higher levels between 8,900-9,300 marks and a breakout on either side will decide further price action.

Although bearish candle formed on a weekly basis, Heikin Ashi candlesticks formed flat bottom which is a strong bullish continuation and indication of the persistence of ongoing positive trend.

The index is also trading above its 5-week SMA placed around 8,855 marks.

Recently, the index is going through ABCD harmonic pattern’s D leg and an inverse head and shoulder classical technical pattern on the lower time frame and both patterns are projecting prices to trade towards 9,650 marks.

Close

On the flip side, a decisive close below the crucial support of 8,700 can push index towards the line of parity standing around 8,200 levels.

Banking Index has formed a higher high and higher low pattern which indicates that the short-term bullish trend will continue.

Bank Nifty has also given second consecutive Heikin Ashi green body candle which suggests price action on bullish side and one should opt for buy on dip strategy. Conversely, any decisive trading below 19,000 will give an early sign of reversal.

Here are three stock recommendations for the next 3-4 weeks:

Tata Motors | Buy | LTP: Rs 74.30 | Buy around: Rs 75 | Target price: Rs 85 | Stop loss: Rs 69 | Upside: 14%

The daily chart of the stock reveals that demand is increasing and supply is diminishing as the stock is taking support from line of the parity showing a rebound from its lower levels.

Prices have been trading above the consolidation of a double bottom breakout for the last few days showing strength from the bottom.

With the chart looking attractive and decent volume participation witnessed, we recommend a buy around 75 in this stock for an upside target of 85, keeping a stop loss of 69.

Maruti Suzuki India | Buy | LTP: Rs 5,050 | Buy around: Rs 5,000 | Target price: Rs 5,600 | Stop loss: Rs 4,600 | Upside: 11%

The scrip spurted from a low of Rs 4,000, it showed pullback on upside marked the high of Rs 5,600 mark and started consolidating there. This pullback rally and consolidation have taken the form of Cup and Handle pattern from the last few days.

Currently, it is waiting for the breakout on the upside so that it can accelerate buying momentum further. An emerging line of polarity on the daily time frame of the chart is suggesting bullish momentum in the scrip.

Indicators and oscillators are also showing a conducive scenario in the coming sessions. So, based on the mentioned technical structure one can go long in the scrip around 5,000 for the target of 5,600 marks with a stop loss of 4,600.

HDFC Bank | Buy | LTP: Rs 937 | Buy around: Rs 925 | Target price: Rs 1,000 | Stop loss: Rs 880 | Upside: 7%

The stock has formed an ascending price pattern on the daily chart, which should resolve on the upside after its brief consolidation. The momentum oscillator RSI is in positive territory and entering into a trending phase. The MACD too indicates good momentum-trend follow through.

We recommend a buy in HDFC Bank around 925 with a stop loss of 880 and a target price of 1,000

(The author is Head of Technical Research, Narnolia Financial Advisor)

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their 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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