If 11,785 trade on a higher side decisively then we can expect the uptrend to resume once again till 12,000 levels, which is a short term target as per Fibonacci projection.
Market took a breather after testing all time high last week, the follow up buying was missing and even after Friday’s session up move we closed substantially lower from the weeks high and Nifty50 closed with the marginal gain of 0.35 percent only.
Nifty50 has witnessed three “Doji” candlestick patterns last week in a row which was followed by large red candle and resulted in “Bearish Engulfing” pattern.
On weekly time frame also, there is a formation of “Doji” candlestick pattern which is giving a sense of indecisiveness. Negative divergence in RSI in daily time frame suggests that there is loss of momentum at least for a time being.
Though the bullish trend in medium is still intact but bearish pattern at resistance level cannot be ignored and bulls need to have a cautious approach in short term.
In coming week there are two probable scenarios which could take place and traders need to be flexible enough to react accordingly.
1) The immediate support level is likely to be 11,467 which is 20-day simple moving average and generally the market retraced till 20 DMA after such sharp up move and if it trades lower side then the selling pressure could accelerate up to 11,311. Any reversal from these levels will provide a lucrative buying opportunity.
2) If 11,785 trade on a higher side decisively then we can expect the uptrend to resume once again till 12,000 levels, which is a short term target as per Fibonacci projection.
As far as option data is concerned we have seen a heavy writing in 11,800 CE in last few days which is now shifted to 11,700 strike price. On put side 11,600 PE holds highest cumulative open interest. Such scenario indicating a range bound move in coming days and indecisiveness among traders.
Here are four stocks that could fetch 7 to 17 percent return in short term:
Century Textiles | Rating: Buy | Target: Rs 986 | Stop Loss: Rs 890 | Return: 7 percent
We have previously recommended stock at the level of Rs 830 and still it seems promising for short term. After a sharp up move the stock is consolidating near 20 day moving average and giving a sign of life again. Momentum indicators are trading in bullish zone and RSI on daily chart is showing positive reverse divergence.
RSI on monthly chart is reversing from important support levels and bullish “doji” is also indicating a bullish move in coming days. Thus, it can be bought for short term gain.
Federal Bank | Rating: Buy | Target: Rs 116 | Stop Loss: Rs 91 | Return: 17 percent
On weekly chart there is a positive crossover of major moving averages and fresh upside momentum is likely in coming weeks. RSI has started trading in bullish zone after a long time. There is a formation of inverse “head and shoulder” pattern and looking at the overall structure the breakout is likely.
On daily chart stock is trading above all major moving averages and RSI is giving a signal of reversal after retracement.
RBL Bank | Rating: Buy | Target: Rs 738 | Stop Loss: Rs 646 | Return: 10 percent
After a breakout stock has retraced till support level and formed a bullish candle. The setup suggesting that upside momentum is likely to initiate again. Also, there is positive reverse divergence in RSI. Stock is trading above all major moving averages.
Momentum indicators in all time frames are trading in bullish zone. Thus, the stock can be bought for short term gain.
BEML | Rating: Buy | Target: Rs 1,150 | Stop Loss: Rs 890 | Return: 16 percent
Stock has broken out of a bullish “Head and Shoulder” pattern on weekly chart and giving a sign of trend reversal. Momentum indicators have started trading in bullish zone.
On daily time frame RSI is bouncing from the important support levels and fresh leg of up move is likely to start in coming days. Buying can be initiated at current levels and also on any decline till Rs 950 with the medium term perspective.
(The author is Senior Research Analyst at Rudra Shares & Stock Brokers.)Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are her own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.