Shabbir Kayyumi
Nifty was trading lower throughout the week but managed to maintain the pattern of higher high and higher low formations on a weekly basis which indicates correction leg is in progress. The index needs confirmation of closing above 5-DMA for stop and reverse pattern to buy. Intermittent correction and bounce back is a healthy sign for our markets as it allows cooling of momentum oscillators and helps bulls regain strength. However, one needs to be cautious on a decisive move below 10,800 which will be an early sign of trend reversal.
Weekly and monthly parabolic SAR continued with a buy signal and as soon as correction leg concludes, original uptrend begins which can be used as a buying opportunity. However, current correction can extend to 20-DMA placed around 10,950 and lower towards crucial support zone standing near 10,800 mark.
Guppy moving average is still in buy mode as short-term moving averages are trading above all long-term moving average showing strength in the current price action. At the same time, this move of the index has filled an important bearish gap placed around 11,260 mark and any further move can touch another higher gap standing around 11,633 levels.
Furthermore, monthly and weekly Heikin candlestick patterns are flat bottom with higher high formations suggests prices can still trade higher towards previous swing pivot standing around 11,350 mark.
Bank Nifty
After making a top of 23,200, the banking index corrected this week. It has been trading in a range of 2,000 points for the last 2 weeks. The index is having a line of parity support near 21,000 and one should be cautious on a decisive move below these levels. Though, in a very near term, a pullback to the range high looks possible.
Here are three stock which can return 13-21 percent in the short-term:
IDFC First Bank: Buy Around Rs 26.30 | Target: Rs 32 | Stop Loss: Rs 24 | Upside: 21 percent
On the weekly chart, the stock has taken the support of the rising trend line and 10 weekly SMA. Construction of inverted Head & Shoulder (H&S) pattern on the daily chart indicates a pullback on the upside. The momentum indicators and oscillators are in the buy mode on a weekly scale which hints that bulls are still have an upper hand. Based on the above technical structure, one can take a long position in the stock around Rs 26.30 with a stop loss of Rs 24 for the target of Rs 32.
RBL Bank: Buy Around Rs 166 | Target: Rs 190 | Stop Loss: Rs 154 | Upside: 14 percent
Bargain hunting is seen at lower levels in the scrip from where it formed a strong base. Currently, it formed a double bottom on the daily chart along with the positive divergence in RSI which suggest a reversal is around the corner. Indicators and oscillators are also lending support to the price action. Traders can take the entry at Rs 166 levels for the target of Rs 190 while keeping a stop loss of Rs 154 mark.
Bandhan Bank: Buy Around Rs 340 | Target: Rs 385 | Stop Loss: Rs 310 | Upside: 13 percent
Scrip spurted from a low of Rs 325-327 after forming dragonfly doji on weekly and Hammer formation on the daily chart. It showed pullback on upside marked the high of Rs 402 and started consolidating in shorter time frame charts. Currently, it is waiting for the breakout on the upside so that it can accelerate buying momentum further. The 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 Rs 340 for the target of Rs 385 mark with stop loss of Rs 310.
The author is Head of Technical Research at Narnolia Financial Advisors.
Disclosure: Narnolia Financial Advisors/Analyst (s) does/do not have any holding in the stocks discussed but these stocks may have been recommended to clients in the past. Clients of Narnolia Financial Advisors Ltd. may be holding aforesaid stocks. The stocks recommended are based on our analysis which is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
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