Rohan Patil
Indian indices reversed after filling the runaway gap which was created on January 9. Nifty broke the two-day losing streak and ended higher but off the day's high on the back of buying seen in the select metal, FMCG and auto stocks.
After showing weakness in the last couple of sessions, Nifty witnessed a decent upside on January 29 and closed the day higher. A small body of a positive candle was formed which is within a body of the previous day's candle.
Nifty is currently trapped in a range of 120 points which is bounded by the 21 and 50-day exponential moving averages, which indicates range-bound trading in Indian indices.
Ahead of January 2020 expiry and the Union Budget, volatility will be on its peak so trading with a lighter position with strict stop loss is essential. Creating any big position ahead of Union Budget without proper stop loss can be hazardous to your pocket.
Bank Nifty, after retesting the neckline of head & shoulder pattern, has again drifted below its neckline and is looking weak. PSU banks are likely to underperform the banking index.
Nifty appears to have a bearish technical set up so it may witness a selling pressure ahead.
On the lower end, Nifty will find major support at 11,930 and at 11,850 levels. However, on the higher side, the index will continue to face hurdles around 12,300.
Here are three buy calls for the next 3-4 weeks:
BPCL | Buy | LTP: Rs 478.65 | Target: Rs 510 | Stop loss: Rs 460 | Upside: 6.55%
After consolidating in a broad range of Rs 448–480, the stock has moved above the downward sloping trend line which is connecting by joining the high of Rs 549. This suggests buying in the stock on the daily timeline.
On the daily chart, BPCL has given a breakout of “falling wedge pattern” and currently, the prices are trading above its trend line support which is placed at Rs 463.
On the daily chart, the counter is trading above its 20 & 50-day exponential moving average. On the daily timeframe, momentum oscillator RSI (14) has bounced back strongly from 35 levels and in its recent move, RSI (14) has found support at 35 and has moved to 52 levels.
On the previous two occasions, whenever RSI (14) has drifted near 35 levels, a sharp reversal in prices has been seen.
Traders can accumulate the stock in the range of Rs 476 - 480 for the target of Rs 510 with a stop loss below Rs 460 on a daily closing basis.
Birla Corporation | Buy | LTP: Rs 750 | Target: Rs 820 | Stop loss: Rs 710 | Upside: 9.33%
After a broad-based consolidation for more than a year, this stock has witnessed a breakout of “inverted head & shoulder pattern” on a weekly timeline. Prices are currently sustaining above its neckline support and looking steady to move ahead.
Currently, prices are sailing above all its major exponential moving averages, which is positive for the stock.
On the weekly frame, momentum oscillator RSI (14) has given a breakout of its horizontal trendline and currently reading above 60 levels with positive crossover.
Traders can accumulate the stock in the range of Rs 745 -755 for the target of Rs 820 with a stop loss below Rs 710 on a daily closing basis.
Ircon International | Buy | LTP: Rs 483.30 | Target: Rs 527 | Stop loss: Rs 460 | Upside: 9%
Ircon International has given a breakout above its horizontal trendline on the weekly chart. Prices have consolidated in a broad range for almost 5 months.
Now, the stock has given a breakout on the upside, indicating the resumption of the uptrend.
The stock has given a breakout on the upside from Bollinger Band with an expansion of bands, indicating the continuation of the trend in the direction of breakout on the daily chart.
MACD line has given positive crossover with its average above equilibrium level of zero on daily as well as a weekly chart.
Traders can accumulate the stock in a range of Rs 483 - 486 for the target of Rs 527 with a stop loss below Rs 460 on a daily closing basis.
(The author is a technical analyst at Bonanza Portfolio)
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