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'Continue with buy on dip strategy, these 3 picks could return 10-20% in short term'

Early signs of trend reversal will come on a close below the previous two day's low standing around 13,400.

December 27, 2020 / 01:56 PM IST
 
 
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Benchmark index Nifty50 recovered early losses and managed to close near 52-week high, suggesting strength of the current rally. Continuation of green Heikin-Ashi candle on the weekly time frame and closing near the previous week's high also indicates continuation of positive price action.

After a minor fall at the start of the last week, Nifty bounced back sharply from the line of parity standing around 13,131 mark and index managed to stay & close above 20 DMA.

Furthermore, Guppy moving averages bullish setup and PMI indicator trading above its five-day moving average indicates one can continue with buy on dip strategy. At the same time GANN square box and Fibonacci extension suggests current upmove has no major resistance till the upper levels of 14,100.

Bullish crossover of 5 DMA & 10 DMA and sustainability above 20 DMA suggests prices can trade higher towards 14,100 mark. However early signs of trend reversal will come on a close below the previous two day's low standing around 13,400.

Bank Nifty

Close

Although the banking index gave a minor correction during the last week, it has managed to sustain above its 5 DMA and 20 DMA indicating that the bulls are not leaving the grip. Moreover, any fresh move above 31,000 will help unfold a new impulse wave. Immediate support is standing around 28,900 and any daily close below these levels will indicate sign of trend reversal.

Here is the list of three stocks which could return 10-20 percent in short term:

Federal Bank: Buy Around Rs 63 | Target: Rs 75 | Stop Loss: Rs 55 | Upside: 20 percent

Stock has maintained a strong base near Rs 55-57 zone and current sustainability above all significant averages has improved the bias with a positive candle formation on the daily chart with higher highs-lows from three consecutive days. The RSI also has indicated a trend reversal to signal a buy. With the chart looking attractive, we suggest buying this stock around Rs 63 for a target of Rs 75 & Rs 78, while keeping the stop loss of Rs 55.

Indian Oil Corporation: Buy Around Rs 88 | Target: Rs 105 | Stop Loss: Rs 83 | Upside: 19 percent

The stock saw a decline from Rs 97 to Rs 84. Since then, it has been making higher trough and higher crests indicate upward swing from lower levels. On the weekly chart, the stock has formed a Hammer candlestick reversal pattern. Volumes have been high at lower levels, indicating accumulation in the stock. MACD has given a positive crossover with its average above equilibrium level of zero on the daily chart. Thus, stock can be bought at around Rs 88 levels with stop loss below Rs 83 for a target of Rs 98 and Rs 105 levels.

Sun Pharmaceutical Industries: Buy Around Rs 585 | Target: Rs 640 | Stop Loss: Rs 550 | Upside: 10 percent

This counter appears to have registered a clean break out with a close above its multi-week consolidation zone on the weekly line chart. Strong bullish candle with decent volume is showing more upside move in the coming sessions. If the stock closes above Rs 595 levels, it should eventually head higher towards its initial range breakout target of Rs 640. For the time being, positional traders are advised to buy around Rs 585 into this counter for a target of Rs 640, with a stop below Rs 550 on a closing basis.

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.
Shabbir Kayyumi is the Head of Technical & Derivative Research at Narnolia Financial Advisors. He has rich experience in Technical Analysis across Equities, Commodities, Global Indices and Global Currencies. His strength lies in Elliott wave and Neo Wave theory while he is equally proficient in Candlestick patterns, Fibonacci, price projection, classical Dow Theory, and inter market analysis for interpreting market trends.
first published: Dec 27, 2020 01:54 pm

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