Nifty recovered its losses and managed to close above 20 DMA last week, however, the banking index closed in the red. The market took support from the line of parity standing around 11,200 mark and traded higher and closing above 5-DMA. This signals that short-term bias continues to remain positive.
Benchmark index is also trading above 100-week SMA and we have seen a 20-week SMA crossing over 200-week SMA which is a bullish sign in mid-term. At the same time, monthly and daily Heikin-Aashi candles are having bullish formations which imply short-term and long-term bullish price action is still intact.
Recently, the index has formed an inverse head and shoulder pattern on a lower time frame which is again a bullish sign. Targets of the pattern are 11,700 on the higher side and it is valid till Nifty trades above 11,200 mark. One can continue with the buy on dip strategy till Nifty remains above 11,200.
Bank Nifty traded lower throughout last week but managed to close above 50-DMA. The banking index is trading in a rising channel and currently, it is trading near its lower trend line which increases chances of taking support near 22,000. However, confirmation of resumption of the upmove will come on a daily close above 23,000.
Here is the list of three stocks which could return 11-16 percent in short-term:
Canara Bank: Buy around Rs 100 | Target: Rs 116 | Stop Loss: Rs 92 | Upside: 16 percent
Bargain hunting is seen at lower levels in the scrip from where it has formed a strong base near Rs 92-94 levels. Currently, it has given consolidation range breakout on the daily chart in which the stock has been trading for the last few days and the momentum oscillator RSI also turned above 50 mark which suggests a reversal is round the corner. Other indicators and oscillators also lending support to the price action. Traders can enter around Rs 100 for the target of Rs 116 and Rs 130 while a keeping stop loss at Rs 92.
ITC: Buy around Rs 184 | Target: Rs 205 | Stop Loss: Rs 174 | Upside: 11 percent
Short-term correction seems to be over in the stock and bulls are likely to take the charge again. The bullish candlestick pattern suggests that bulls have entered the counter at lower levels. Furthermore, the formation of double bottom pattern on the daily chart with decent volume is providing an additional signal that short-term rally might be on the cards in the coming days. Traders can initiate long positions around Rs 184 with a stop loss of Rs 174 for the target of Rs 205.
Larsen & Toubro: Buy around Rs 910 | Target: Rs 990 | Stop Loss: Rs 870 | Upside: 8 percent
Scrip spurted from a low of Rs 900 while forming a cup and handle pattern on the weekly chart. Currently, it is waiting for another breakout on the upside so that it can accelerate buying momentum further. Line of polarity on the daily time frame stands around Rs 900-910 zone which is suggesting bullish momentum in the scrip. Indicators and oscillators are also showing conducive scenario in the coming sessions. So based on the mentioned technical structure, one can go long in the scrip around Rs 910 for the target of Rs 990 mark, keeping stop loss at Rs 870 on a closing basis.
(The author is Head of Technical Research at Narnolia Financial Advisors Ltd.)
Disclosure: Narnolia Financial Advisors Ltd. is a SEBI registered Research Analyst having SEBI Registration No. INH300006500. The Company/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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