Markets gave away all opening gains and closed in the red in the previous trading session, below the 20-day moving average, indicating profit-booking on the higher side.
Nifty formed a bearish candlestick pattern on the weekly timeframe, but it gave the highest monthly closing of the last ten months.
This indicates in mid-term a strong bullish momentum is in progress which can continue unless we see closing below 11,350.
The current correction in the market in terms of Elliott wave count is following ABC flat correction. At the same time price momentum oscillator (PMO) has reached below (-200) marks which suggests that very soon, bearish momentum may get over.
Moreover, crucial supports are presented by the line of polarity, standing around 11,500. However, any decisive closing below 11,500 can push the index towards unfilled gaps placed around 11,452-11,428 and lower towards 11,347-11,295.
Going forward, when it comes to positional signal, Supertrend, a very popular indicator is in buy mode on daily, weekly and monthly timeframe.
This trend will change only if the index will trade below the trailing stop loss line, placed around 11,300 as per this indicator.
Bank Nifty traded lower last week but still closed above the 20-day moving average. The banking index is trading above all important moving averages (20/50/100/200 DMA) and it should find strong support on the downside.
Here are three buy calls for the next 3-4 weeks:
On the daily chart, the stock price has decisively broken out from its neckline of the Inverted Head & Shoulder pattern and is sustaining above the same.
On the daily and weekly chart, the stocks have witnessed a shift of trend to the upward forming base with congestion.
Golden crossover in the stock hints that the upside momentum will continue in the near-term.
The stock price is sustaining well above all its significant moving averages which supports bullish sentiment ahead.
GAIL (India) | LTP: Rs 84.85 | Target price: Rs 94 | Stop loss: Rs 78 | Upside: 11%
After a prolonged downtrend, the stock is showing a sign of life as it is forming a double bottom pattern at lower levels which suggests a reversal is round the corner.
The daily RSI is bouncing back from the important support level along with positive crossover in stochastic and other momentum indicators, suggesting a short-term pullback on the upside in the stock in the coming days.
ICICI Bank | LTP: Rs 393.50 | Target price: Rs 420 | Stop loss: Rs 370 | Upside: 7%
The initial signal of trend reversal buying can be seen in the weekly chart as it found support from its key moving averages on the daily chart.
Momentum indicators have started trading in a bullish zone. On the weekly timeframe, it formed a bullish belt hold candlestick pattern that suggests strong support at bottom levels.
Positive crossover of medium-term moving averages is also giving cues to take a long position in the stock.
(The author is Head of Technical Research at Narnolia Financial Advisors)
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