In the week gone by, the Nifty found resistance in the downside gap formed on April 18 in the 17,237-17,457 zone and ended with a "Long Legged Doji" candle on the weekly charts, indicating indecision in the short-term trend.
The candlestick raised hopes for the bulls, as it could pause the down moves in the Nifty. However, if the Nifty were to break the low (16,824) of this weekly candle, selling pressure could intensify further.
The Nifty has formed a short-term top at 17,414, which needs to be surpassed for violating the short-term bearish trend.
On the downside, 20- day exponential moving average (EMA) and the previous swing low of 16,824 is expected to act as support.
Below 16,824, the Nifty could slide to 16,604, which happens to be a 61.8 percent retracement of the entire rise from 15,671 (low of March 8, 2002) to 18,114 (the high of April 4, 2022).
Indicators and oscillators like relative strength index (RSI), moving average convergence divergence (MACD) and directional movement index (DMI) have turned bearish on the Nifty daily charts.
Considering the technical evidences discussed above, we believe that if the Nifty manages to protect 16,824 support, there is a good chance of a pullback in the short term.
However, on the upside, 17,414 is a strong resistance, which needs to be surpassed on a closing basis for a bullish trend reversal. It is advisable to hold existing Nifty longs with a strict stop-loss of 16,824.
Here are three buy calls for the next two-three weeks:
Action Construction Equipment: Buy | LTP: Rs 245 | Stop-Loss: Rs 228 | Target: Rs 281 | Return: 15 percent
The stock has been finding support at its 200-day EMA for the past six months. Last week, it broke out from the narrow range with a jump in volumes. The stock has surpassed the crucial resistance of the previous swing high of Rs 244.
Weekly RSI has reached above the benchmark level of 50, indicating rising momentum. The weekly MACD indicator has crossed the signal line on the upside and has reached above the equilibrium line. The stock is placed above all important moving averages, indicating a bullish trend in all time frames.
Ceat: Buy | LTP: Rs 1,190 | Stop-Loss: Rs 1,080 | Target: Rs 1,335 | Return: 12 percent
The stock has seen a sharp recovery from the recent bottom of Rs 919. Recovery was registered with rising momentum and volumes. The stock recently surpassed its 200-day EMA, which indicates a long-term bullish trend reversal.
Indicators and oscillators like RSI, DMI and MACD have been showing strength in the current up move. The stock has started forming higher tops and higher bottoms on the weekly chart.
Bandhan Bank: Buy | LTP: Rs 333 | Stop-Loss: Rs 315 | Target: Rs 360 | Return: 8 percent
A downward sloping trend line breakout was seen on the weekly charts. Price breakout was accompanied by a jump in volumes. The stock has surpassed the previous top resistance of Rs 331 on the weekly chart. It is now placed above all important moving average parameters.
Indicators and oscillators like RSI, DMI and MACD have been showing strength in the current up move. The relative strength of the stock is high as compared to other banking stocks.
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