The Nifty50, after showing strength over the past few sessions, reacted to weak global cues on May 11 and closed with losses of nearly 100 points.
Although the selling was visible at higher levels above 14,900 where all the call writers were active, just ahead of the weekly expiry on Thursday, bulls helped the market limit the downfall.
Looking at the technical and derivatives setup, we remain cautiously positive on markets for May 12. The current consolidation appears to be a 4th wave consolidation on a shorter time frame where 14,775 and 14,715 are the immediate support levels for Nifty.
The said levels are the 38.2% and 50% Fibonacci retracement levels, respectively, from the lows of 14,463 made on the 4th of May and the high of 14,966 tested on the 10th of May.
We expect the Nifty50 to take support around these levels and continue to consolidate within a range of 14,750-14,950 for the next 2-3 trading sessions before resuming the uptrend and break above the 15,000 mark once again.
The Nifty Bank has been lagging behind but 32,500 remains a strong support zone and we expect the index to move towards the 33,200-33,500 zone in the coming days.
Long additions are being witnessed in capital goods, oil & gas sectors.
Mid and small caps continue to outperform and witness strong buying.
Here is a list of top trading ideas for the short term:
BPCL: Buy| Target: Rs 500| Stop Loss: Rs 440
The stock is on the verge of a breakout from a rounding bottom pattern after forming a strong base around Rs 400-420.
The stock has also cleared a psychological barrier of Rs 450 where the call writers are seen covering their positions.
A buy crossover on the short-term moving averages and the ADX at 23 support the bullishness in the stock.
Mangalore Chemicals & Fertilizers Ltd: Buy| Target: Rs 125| Stop Loss: Rs 80
This mid-cap counter is looking strong on the charts as the recent move above Rs 85-90 zone was faced with major resistance. Also, on the short-term charts, the counter bounced from a double-bottom formed around Rs 70 zone on huge delivery volumes.
The MACD on the weekly charts is giving strong positive divergence along with a buy crossover, adding further evidence to the bullish setup.
We expect the stock to start fresh up move in the short to medium term with a potential to even deliver more than 50% returns in the coming months.
NHPC: Buy| Target: Rs 32-35| Stop Loss: Rs 24
The stock has given a breakout from the cup and handle pattern on the weekly charts within a bigger rounding bottom formation which is a very bullish technical setup.
The RSI on the daily time frame has given a breakout from the downward sloping trend line and the volume activity has also been picking up very strongly over the past few sessions which confirms our bullish bias.
(The author is VP Research Globe Capital Markets)Disclaimer: The views and investment tips expressed by the investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.