Rohan Patil
After witnessing a sharp rally in April, benchmark index Nifty formed a 'Bearish Island' reversal pattern in the first week of May 2020.
The recent rally was capped around a 50-day exponential moving average on a daily interval at 9,700 levels.
On May 6, 2020, initially, it was a guessing hour for the traders as the benchmark index swung both ways.
Later, Nifty continued holding its bullish bias and closed the index a percent higher.
Nifty once again respecting its 21-day exponential moving average and closed above the said average.
Geopolitical tensions between China and the USA and low April manufacturing PMI data created bearish sentiment among traders, which also increases volatility.
When we compare the current fall in the benchmark index with 2008 fall on the monthly chart, we can observe that first retracement after the fall was almost 50 percent in 2008 and then Nifty traded sideways in a narrow range for almost 4 months.
On the daily chart, Nifty has also completed its Bearish ABCD Harmonic pattern at 9,650 levels and slipped below the potential reversal zone (PRZ) level, which indicates Nifty may face strong resistance around 9,650 level.
Bank Nifty, on the other hand, neglecting its previous week's bullish setup, has witnessed a breakdown of the upward rising trend line on the daily chart and it is currently underperforming the benchmark index.
The banking index is capped under the 21 and 50-day exponential moving averages on a daily interval.
We believe Nifty will hold its bearish bias until and unless it neglects its Bearish Island reversal pattern which is formed at around 9,650.
In case the benchmark index fills the gap then there will be a sudden change in the sentiments. Supports are placed at 9100; a drift below this level will open the gate for 8,800 in the coming weeks.
Here are three stock recommendations for the next 3-4 weeks:
Voltas | Sell | LTP: Rs 463.90 | Target price: Rs 414 | Stop loss: Rs 495 | Downside: 10.75%
Voltas has breached its almost 30-month long horizontal trendline and is currently trading below its support level on a weekly timeline.
The majority of indicators and oscillators are negatively poised and are looking week to drift further.
The stock has drifted below its 50 & 100-day exponential moving average (EMA) on the weekly timeframe, which indicates bears are in full control to push prices lower.
The counter is likely to underperform the benchmark index which is visible on the Relative Strength (RS) indicator on a weekly interval.
Traders can short the stock in the range of Rs 460-466 for the target of Rs 414 with a stop loss above Rs 495 on a daily closing basis.
L&T has witnessed the Bearish Pole Flag pattern breakdown in the daily timeframe. The counter is trading in lower low lower high formation on a weekly timeframe which indicates the ongoing negative trend for the counter.
The stock has currently completed its pullback and looks geared for its next leg of fall. The counter is likely to underperform the benchmark index which is visible on the Relative Strength (RS) indicator on a weekly interval.
Traders can short the stock in the range of Rs 834-840 for the target of Rs 760 with a stop loss above Rs 885 on a daily closing basis.
Bharti Airtel | Buy | LTP: Rs 546 | Target price: Rs 610 | Stop loss: Rs 510 | Upside: 11.72%
After a two week consolidation, Bharti Airtel has seen a Cup and Handle pattern breakout on the daily scale.
The counter on the weekly chart has completed a V-shape reversal rally and is looking positive ahead.
The counter is currently outperforming the benchmark index which is visible on the Relative Strength (RS) indicator on a weekly interval.
Momentum oscillator RSI (14) is reading above 60 levels on the weekly chart with positive crossover on the cards.
Currently, the stock is trading above its trend line support and is sustaining above its 21 and 50 days EMA on a daily interval.
Traders can accumulate the stock in the range of Rs 543-549 for the target of Rs 610 with a stop loss below Rs 510 on a daily closing basis.
(The author is Technical Analyst, Bonanza Portfolio)
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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