Nandish Shah, Senior Derivative & Technical Analyst, HDFC Securities
Nifty plunged by 348 points on Monday on the back of across-the-board selling spree to close at 17,416 levels - its lowest since September 20. Short-term trend of the Nifty turned bearish as it closed below its previous swing low of 17,613 made on October 29. Moreover, the Nifty has closed below its upward sloping trendline, adjoining the lows of October 1 and October 29.
In the derivatives, we have seen aggressive Call writing at 17,800-18,000 levels. Moreover 20-day EMA (exponential moving average) is currently placed at 17,900 levels. Therefore, unless the Nifty closes above 17,900 level, short-term trend will remain bearish.
Since July 2020, the Nifty took support at 20-week EMA multiple times and bounced back. The Nifty has never closed below its 20-week EMA since June 2020, which is currently placed at 17,200. In September also, the index took support around 17,250 twice, indicating 17,200-17,250 levels to act as a strong support going forward.
To sum it up, we believe that the short-term trend of the Nifty turned negative. Therefore, our advice is to remain cautious till it closes above the 17,900 levels. On the lower side, we expect it to find support around 17,200 levels. If the Nifty closes below 17,200 levels, the next downside targets are placed at 17,050 and 16,700.
Here are two buy calls and one sell recommendation for the next 2-3 weeks:
Heritage Foods: Buy | LTP: Rs 474.50 | Stop Loss: Rs 445 | Target: Rs 525 | Return: 11 percent
After taking support at 100-day EMA, the stock price witnessed more than 5 percent recovery from an intraday low of Rs 452-odd levels with higher volumes.
During the last six months, Heritage Foods has taken support at 100-day EMA multiple times and bounced back, indicating that the stock has reached near its strong support level. The primary trend of the stock is positive as it is trading above its 200-day EMA.
SIS: Buy | LTP: Rs 507.65 | Stop Loss: Rs 480 | Target: Rs 560 | Return: 10 percent
The stock price has broken out from the downward slopping trendline on the weekly line chart, adjoining the highs of February 2020 and October 2021.
The primary trend of the stock is positive where it is trading above its all-important short-term and long-term moving averages. Daily RSI (relative strength index) and MFI (money flow index) lines have witnessed trend line breakout, which is a bullish development for the short term.
SBI Cards & Payment Services: Sell | LTP: Rs 1,007.30 | Stop Loss: Rs 1,050 | Target: Rs 940 | Return: 7 percent
The stock price has broken down from the upward slopping trendline, adjoining the lows of July 22 and October 29. Short-term trend of the stock is negative as it is trading below its 5 and 20 day EMA.
Daily RSI and MFI lines are sloping downwards and placed below 40, indicating weakness in the stock.
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