Negative technical indicator and bearish market breadth signal the probability of a further decline in Nifty.
The Indian market began the week on a depressing note amid disappointing Q3 numbers and subdued global cues.
Indian bourses extended the losing streak and shut shop in the red for third straight day.
During this week so far, Nifty has already lost almost 2 percent and is looking weak.
On the weekly chart, the benchmark index has formed bearish engulfing pattern, and to negate that formation, Nifty needs to rally almost 200 points in the coming two trading sessions.
The index, after a gap up opening, witnessed a sharp sell-off through the day and closed below 12,200-mark on January 22, which is below the 21-day exponential moving average.
Negative technical indicator and bearish market breadth signal the probability of a further decline in the index.
At the current juncture, Bank Nifty has given a breakout of a bearish classical Head & Shoulder pattern and the index is currently trading below its neckline on a daily scale.
Looking at the current momentum, Bank Nifty is likely to underperform the benchmark index.
At the lower end, Nifty will find major support around 11,950 and at 11,800 levels. However, on the higher side, the index will continue to face hurdles around 12,400 levels.
Here are two buy and one sell calls for the next three to four weeks:
Ramco Cements | Buy | LTP: Rs 830 | Target: Rs 890 | Stop Loss: Rs 797 | upside: 7%
After a prolonged consolidation, the stock has given a breakout of its cup & handle pattern on the daily time frame.
After witnessing a breakout above the horizontal trendline, the stock was in a consolidation mode for the past few days. A current spurt in prices has been witnessed.
A strong reversal in momentum oscillator RSI (14) from 45 levels has set up a strong base for the stock. The RSI is currently reading above 60 levels with positive crossover on the weekly chart.
Traders can accumulate the stock in the range of Rs 828 - 835 for the target of Rs 890 with a stop loss below Rs 797 on a daily closing basis.
CreditAccess Grameen | Buy | LTP: Rs 795 | Target: Rs 890 | Stop loss: Rs 736 | Return: 12%
CreditAccess Grameen is trading in a higher high higher low formation on the weekly scale, which suggests strong positive momentum is unfolding.
Prices have witnessed a “Pennant Pattern” breakout on the weekly timeline.
Pennant pattern normally acts as a continuation of the prevailing trend. The stock is nicely poised above its major exponential moving averages on weekly and monthly charts.
Weekly RSI (14) has been in a “Bullish Range Shift” for the last couple of months and is currently reading above its upward rising trendline, which is currently placed above 65 levels.
Traders can accumulate the stock in the range of Rs 790 - 805 for the target of Rs 890 with a stop loss below Rs 736 on a daily closing basis.
Bajaj Finserv | Sell | LTP: Rs 9,545 | Target: Rs 9,100 | Stop loss: Rs 9,800 | Downside: 5%
Bajaj Finserv, on the daily chart, has formed Bearish AB = CD harmonic pattern which is coordinated with 78.60 and 127.20 retracement levels.
Momentum oscillator RSI (14) is forming lower high formation on the daily interval and is currently reading below 60 levels, which is a negative crossover.
Prices are also facing upward rising trendline resistance which is placed around Rs 9,700 odd levels.
Traders can sell the stock in the range of Rs 9,560-9,535 for the target of Rs 9,100 with a stop loss above Rs 9,800.
(The author is a technical analyst at Bonanza Portfolio)Disclaimer: The views and investment tips expressed by investment experts 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.
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