By Jigar S Patel, senior manager - equity research at Anand Rathi
Despite being a shortened trading week (ending May 24) due to a holiday on Monday, it was historic for the domestic markets. The Nifty index began the week on a positive note and continued to rise in each trading session, ultimately hitting the milestone of 23,000 during Friday's session and ending the week with gains of over 2 percent. This performance appears to reflect the market's expectation that the BJP government will win the elections with a solid majority.
In a previous analysis, we anticipated that Nifty was set to reach 23,000. As predicted, the index has reached this milestone, leading to some profit-taking in individual stocks. Currently, the index is nearing the upper end of the Rising Channel, positioned around 23,100-23,200. Therefore, we suggest adopting a profit-booking strategy moving forward.
While a breakout from this Rising Channel could occur with exceptionally positive election results, the risk-to-reward ratio does not favour such a move. On the downside, the 22,800-22,600 range is expected to provide strong support in the coming week.
Given that the VIX is above 21 and the Put-Call Ratio (PCR) for NIFTY is over 1.35, it is advisable for traders to start booking profits and avoid this final segment of the election rally.
The Nifty Bank index has retested the 48,800 mark, representing the 61.8 percent retracement of its previous decline, and closed well above this level. In the current week starting from May 27, a sustained move above 49,000 could drive the index towards the 50,000 milestone. On the downside, support is located in the 48,400-48,000 range.
Here are three buy calls for the next 2-3 weeks:
Infosys | CMP: Rs 1,465
Over the past few months, Infosys stock has been consolidating within a narrow trading range, approximately between Rs 1,400 and Rs 1,450. This period of consolidation indicates that the stock was moving sideways without any significant upward or downward momentum. Recently, however, the stock price broke out of this range, moving above Rs 1,450 level and maintaining its position above this previous resistance level. This breakout suggests a potential shift in market sentiment from neutral to positive.
From a technical analysis perspective, the daily stochastic indicator, which measures the momentum of the stock, has reversed direction from the 60 level and is now approaching the overbought zone. This shift in the stochastic indicator implies increasing buying pressure, which is a bullish signal and suggests that the stock may continue to rise.
Based on these observations, we recommend that investors and traders consider taking a long position in Infosys within the price range of Rs 1,445 to Rs 1,470. The target for this trade is an upside of Rs 1,575, which represents a significant potential gain. To manage risk, a stop-loss should be placed near Rs 1,399 on a daily closing basis.
Strategy: Buy
Target: Rs 1,575
Stop-Loss: Rs 1,399
Sumitomo Chemical India | CMP: Rs 440.3
Sumitomo Chemical India has recently faced a significant decline in its stock price and is currently trading around Rs 418, which is close to its 200-day Exponential Moving Average (DEMA). This proximity to the DEMA suggests that the stock might find support at this level, as the 200-day DEMA is commonly regarded as a crucial indicator of long-term trends and support. Additionally, technical analysis reveals that the daily Moving Average Convergence Divergence (MACD) indicator has formed a bullish crossover. This occurs when the MACD line crosses above the signal line, indicating a potential shift from a downward trend to an upward trend.
Moreover, a bullish Bat pattern has appeared on the weekly chart. This harmonic pattern typically signifies a reversal in the market, suggesting that the recent downtrend may be nearing its end and an upward movement might be forthcoming. These combined indicators—the support level near the 200-day DEMA, the bullish MACD crossover, and the bullish Bat pattern—suggest a potentially favorable buying opportunity for investors.
Based on these positive technical signals, we recommend that traders and investors consider entering long positions in Sumitomo Chemical within the price range of Rs 430-440. Our target for this trade is Rs 495, which represents a substantial potential gain from the current levels. To manage risks effectively, we advise setting a stop-loss at Rs 405 on a daily closing basis.
Strategy: Buy
Target: Rs 495
Stop-Loss: Rs 405
MTAR Technologies | CMP: Rs 2,148.5
After peaking around Rs 2,923 level, MTAR experienced a significant downturn, losing approximately 1,260 rupees, which represents a substantial 43 percent decline in its overall value. This sharp decrease indicated a strong bearish phase in the stock's performance. However, over the past week, the stock price has found stability within the Rs 1,800-1,900 range, forming a solid support base. This stabilization suggests that the selling pressure has subsided and the stock may be preparing for a potential rebound.
During this period of consolidation, a bullish divergence has emerged on the daily MACD (Moving Average Convergence Divergence) scale. A bullish divergence occurs when the stock price makes new lows while the MACD indicator makes higher lows, suggesting that the downward momentum is weakening and a reversal might be on the horizon. This positive shift in market sentiment, indicated by the MACD, is a bullish signal that the stock could experience an upward movement soon.
Given these technical developments and observed chart patterns, it may be prudent for investors to consider initiating buy positions in MTAR within the Rs 2,100-2,150 price range. The target for this trade is an upside of Rs 2,450, which reflects a significant potential gain from the current levels. To manage risk effectively, it is advisable to set a stop-loss order at Rs 1,962 on a daily closing basis. This stop-loss level is intended to protect against further declines, ensuring that potential losses are minimized if the stock fails to follow through on the anticipated upward movement.
Strategy: Buy
Target: Rs 2,450
Stop-Loss: Rs 1,962
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
