Bulls continued having an upper hand throughout the last trading week, and the Nifty registered a gain of approximately 140 points on a week-on-week basis. The cautious stance of traders was visible near the psychological mark of 13,000 and mild profit-booking was witnessed at higher levels.
Though the index is facing multiple resistance levels in the 13,000 to 13,050 range and profit booking at higher levels might not be ruled out but, the bullish trend will remain intact until the level of 12,721 holds on the lower side. The medium-term rising trend line formed by joining the highs of August 28, 2018, and January 20, 2020, is likely to act as resistance at the 12,970 levels. Also, as per the Fibonacci theory, the prices are approaching the 161.8 percent projected retracement level based on the previous month's trading range.
The small body candle formed in the weekly time frame suggests that the ongoing rally might see a halt in the short term. On the other hand, the rising window formed on November 17, in the latest month is likely to provide a cushion to the prices on any dip till 12,721. The violation of the aforementioned support level on a closing basis could disturb the ongoing bullish trend and the fall could extend to the 12,510 level.
To put things into perspective, traders can adopt buy on dips approach until the support level holds and expect the trading range of 12,721 to 13,050 levels.
We have identified three trading ideas that could outperform the Nifty and fetch 8.5 to 15 percent return in the short term.
Godrej Consumer Products: Buy | CMP: Rs 699 | Target: Rs 760 | Stop Loss: Rs 670 | Return: 8.5 percent
The stock has broken out of an Inverse Head and Shoulder pattern. After a mild consolidation near its 20-day exponential moving average, bulls are showing a sign of strength. The prices have started trading above the upper Bollinger band along with decent volumes. The momentum indicators have started trading in a bullish zone and prices are trading above all major short-term and medium-term moving averages.
The medium-term trend is also favouring the bulls as the bullish candlestick pattern has been witnessed on the week ending November 6, 2020. The pattern was supported by follow up buying and prices have started trading above 20 periods moving average. Trades can initiate buying positions in the counter at the current market price (CMP) and on any dip till Rs 690 with the short term perspective.
State Bank of India: Buy | CMP: Rs 242.75 | Target: Rs 278 | Stop Loss: Rs 228 | Return: 15 percent
The stock has retraced mildly after a recent breakout. It has been trading in a sideways zone for the last few weeks which now seems to be getting over and bulls are likely to have an upper hand in the short term. The Bearish Engulfing pattern formed on August 31, 2020, has been acting as stiff resistance for the stock in the last few months and the same is likely to act as support after a recent breakout.
Momentum indicators are trading in a bullish zone and rising average directional Index (ADX) suggesting that trending move can be expected in the short term. As there is no major overhead resistance visible on the chart, the rally is expected to be sharp. Traders can initiate buying positions at CMP and on any dip till RS 236 for the short term gain.
Bata India: Buy | CMP: Rs 1,476.90 | Target: Rs 1,653 | Stop Loss: Rs 1,415 | Return: 12 percent
The consolidation in the stock has taken a shape of a rounding bottom formation and a breakout of the pattern has been witnessed recently. The bullish curve of a short term moving averages ribbon after a recent convergence suggests that an up move is on the card. Momentum indicators are trading in a bullish zone, and the adequate volumes support the breakout. The prices are tagging the upper Bollinger band indicates the volatility breakout has also taken place in the counter and the road ahead for the bulls looks quite smooth. Traders can buy the stock at current levels for the short term gain.
(Manish Srivastava, Senior Technical Analyst (Equity & Currency) at Rudra Shares & Stock Brokers Ltd. (SEBI Reg.No.INH100002524) (RA))
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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