The benchmark index Nifty saw a stellar rally in the previous week and managed to trade above the last five sessions' high, which indicates a strong bullish tone in the prices.
The index has formed a flat bottom green Heikin-Ashi candlestick pattern that denotes positive momentum and a close above the last candle’s high is also adding fuel to its bullish journey.
The Nifty is trading above 20, 50, 100 and 200-DMA on daily as well as weekly timeframe, a clear sign that prices are in complete control of the bulls.
Strong buying will emerge on a decisive trade above 11,630 levels, which is the previous three weeks' high.
At the same time, the Nifty has managed to close above the inverse head and shoulders neckline and the target, as per the pattern, is 11,800, which can be achieved if it sustains above 11,150.
The price momentum indicator (PMI) has given a bullish crossover with its average, and as long as it is in buy mode, one can maintain the 'buy-on-dips' strategy.
However, confirmation of the resumption of the original trend will come on the breakout of the slanting trendline, which is standing near the 11,500-mark.
The Nifty can trade in a range of previous high standing around 11,800 and crucial point of polarity placed at 11,111 for the short term.
The Bank Nifty bounced back sharply from the oversold zone and managed to close above 20-DMA, which is a sign of hope for bulls.
It can get follow-through buying on a close above 50-DMA standing around 22,300, which can push the banking index towards the upper Bollinger band placed at around 23,350.
Here are three buy calls for the next two-three weeks:
The scrip spurted from the low of Rs 400 and formed a morning star candlestick pattern. It showed pullback on the upside and marked the high of Rs 445.
It is waiting for the breakout on the upside, so that it can accelerate buying momentum further.
The emerging line of polarity on the daily timeframe of the chart is suggesting a bullish momentum in the scrip.
Indicators and oscillators are also showing a conducive scenario in the coming sessions.
The initial signal of a 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 a daily timeframe, it formed a double bottom pattern which suggests buying in the scrip.
Positive crossover of medium-term moving averages is also giving cues to take a long position in the stock.
The short-term correction seems to be over and the bulls are likely to take the charge again.
The formation of a cup and handle price pattern on the daily timeframe suggests that the 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.
(The author is Head of Technical Research at Narnolia Financial Advisors)
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