Extensive selling in the previous week pushed Nifty lower towards 200 DMA standing around 10,790 mark; however it managed to bounce back on Friday & close above crucial psychological levels of 11,000. At the same time, index has closed inside BB lower band after giving a bearish breakdown suggests the possibility of the reversal or pull back towards the middle band which is standing around 11,300.
The index is trading below 20 DMA (11,350) and 50 DMA (11,300) but for a deeper correction to occur 20 DMA needs to cross below 50 DMA. If that happens the downside target would be the 20-week SMA standing around 10,680.
Overall, Nifty can trade in a range of 20 DMA standing around 11,350 mark and 200 DMA placed near 10,800 levels for the coming week whereas strong movement on either side will decide directional action. But for the rally to resume, Nifty needs to close above 11,350 mark, till then sell on a higher level would be the right strategy. Also, in the very near term, rapid fall in the last week has put the majority of the oscillators in an oversold zone, so chances of bounce back to cool off the indicators is likely possible.
Bank Nifty too traded with a negative tone during the last week and closed below the majority of the moving averages indicating bearish bias to continue further. As long as Bank Nifty is trading below 22,500 where it's 20 DMA is placed one can opt for a sell on rise strategy.
Here is the list of three stocks which could return 8-17 percent in short term:
Tata Steel: Buy Around Rs 345 | Target: Rs 405 | Stop Loss: Rs 315 | Upside: 17 percent
The short-term correction seems to be over in the stock and bulls are likely to take the charge again. Formation of Bullish Harami candlestick pattern on daily timeframe suggests that bulls have entered the counter at lower levels. Further, the line of parity on the daily chart is providing good support which gives an additional signal that the short-term rally might not be ruled out in the coming days. Traders can initiate long positions around Rs 345 with a stop loss of Rs 315, and the target of Rs 405.
JSW Steel: Buy Around Rs 265 | Target: Rs 295 | Stop Loss: Rs 245 | Upside: 11 percent
The initial signal of trend reversal buying can be seen in the weekly chart as it found support from 200-week SMA. The momentum indicators have started trading in a bullish zone. On the daily time frame, it has formed Morning Star candlestick pattern suggest buying in the scrip. Positive crossover of medium-term moving averages are also giving cues to take long position in the stock. Traders can initiate buying at the price of Rs 265 for the short term towards Rs 295 with SL of Rs 245 mark.
ICICI Bank: Buy Around Rs 345 | Target: Rs 375 | Stop Loss: Rs 325 | Upside: 8 percent
After a prolonged downtrend, the stock is showing a sign of life. The short-term moving averages ribbon on the weekly time frame providing strong support positive curve and prices are also trading above all medium-term moving averages. The daily RSI is bouncing back from the important support level and other momentum indicators suggesting a short term pullback on upside in the stock in the coming days. Traders can initiate buying around Rs 345 levels for the target of Rs 375 with stop loss of Rs 325 mark.
(Shabbir Kayyumi is the Head of Technical Research at Narnolia Financial Advisors Ltd.)
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