The Nifty gained for the fifth straight session to a fresh all-time closing high of 19,322 on July 3. The Nifty added another 0.70 percent in the current upward rally. The market ended the month and the quarter on a strong pitch. The tally of the stocks above their 200 DMA (days moving average) among the NSE500 has surged above 76 percent, which indicates strong breadth.
The previous all-time high for the Nifty was at 18,887. This also happened to be the 50 percent Fibonacci extension considering the swing of June 2022 bottom to December 2022 top, and from December 2022 top to March 2023 bottom in the Nifty. Since this hurdle is surpassed decisively, same is now expected to interchange its role as a support for the Nifty.
As far as resistance for the Nifty is concerned, it is placed at 19,374. This resistance is derived from the golden ratio extension levels of the same swing mentioned above.
Now, let us consider some other data points. First, we began the July series with highest ever open interest in stock futures at 523 crore shares, the highest since February 2018 series. Second, the long to short ratio of the FII has ballooned to 2.25 from 1.36 in June. Third, since June 2017, we have not seen more than three back-to-back series gains in the Nifty. The last three series closed in the green.
However, we believe that one should not try to anticipate top for the markets unless we get some confirmation. So, one need not throw in the towel yet as July month has second highest average gains of 1.79 percent after December in the Nifty, if we look at seasonality chart of last 29 years starting from year 1994.
Since the Nifty has reached in the uncharted territory, we should better be with the trend. The trend of the Nifty is likely to remain bullish unless it closes below 18,900. Till then every dip should be considered as a buying opportunity. We expect PSU Banks and Metal sector to do well in the near term.
Here are three buy calls for next 2-3 weeks:
Union Bank of India: Buy | LTP: Rs 74.9 | Stop-Loss: Rs 72 | Targets: Rs 82-88 | Return: 17.5 percent
The stock price has broken out from downward sloping trendline adjoining previous swing highs on the weekly chart. Price breakout is accompanied with rising volumes.
PSU banking sector has started outperforming the markets. Stock has reached above all important moving averages, which indicates bullish trend on all time frames. Indicators and oscillators have turned bullish on weekly charts.
Jindal Stainless: Buy | LTP: Rs 340.1 | Stop-Loss: Rs 317 | Targets: Rs 374-395 | Return: 16 percent
The stock has closed at new all-time highs with rise in volumes. Primary trend of the stock has been bullish with higher tops and higher bottoms on the weekly and monthly charts.
The stock has broken out from the recent consolidation pattern on the daily chart.
Canara Bank: Buy | LTP: Rs 318.5 | Stop-Loss: Rs 302 | Targets: Rs 340-355 | Return: 11.5 percent
The stock surged more than 5 percent with significant jump in volumes on July 3. The stock is on the verge of breaking out from the important resistance of Rs 330, derived from previous swing high and downward sloping trend line resistance.
It recently found support on its 50-day EMA (exponential moving average Rs 303.5) during correction phase and reversed north. PSU Bank index has broken out on the weekly chart.
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