The most dreadful F&O series of March 2020, fortunately, ended on an optimistic note for the domestic market on March 26.
Nifty recovered sharply in the last three sessions but ended the series with a loss of over 25 percent.
Although it recovered sharply from the lows, the index has been trading in the red for the fifth consecutive week.
Meanwhile, the Nifty Bank index has lost around 3 percent from the previous week and is trading just below 20,000-mark.
Until the previous week, we had a view that the range of 8,000–7,000 can be a place where the market is likely to bottom out.
This was mainly due to the major hidden divergence in the monthly RSI of Nifty. In line with that view, the index has turned after touching the low of 7,511 and is trading 1,000 points above this mark.
At present, the index has managed to close above its short term 5-days exponential moving average for the first time in the last month.
Also, we are witnessing a positive crossover in the daily RSI smoothened oscillator and that too, from a highly oversold zone.
Thus, we are of the opinion that going ahead, a move above 8,750 would help the index to extend the pullback towards 9,500 levels, which is a long way from this average.
Thus, as per the mean reversion theory, the index might move higher to retest the same.
On the downside, the intermediate support is placed at 8,300 followed by 7,900 for the coming week.
A dip towards the same should be used to start picking quality Nifty50 stocks. The bullish view would be negated below 7,400 on a closing basis.
Here are three stock recommendations for the next 3-4 weeks:
IDFC First Bank | Buy | LTP: Rs 21.90 | Target: Rs 26 | Stop loss: Rs 17 | Upside: 19%
In the recent fall, the stock has corrected more than 60 percent from the peak of Rs 48 to end below the Rs 20-mark.
Now at this juncture, the stock has been in a highly oversold condition on most of the time frames.
The stock has found support near Rs 18 mark, which is exactly the 161.8 percent Fibonacci retracement (golden ratio) of the entire rally from Rs 32 of October 2018 to Rs 57 of April 2019.
Traders are advised to buy the stock on the dip from Rs 21 to Rs 19 for the target of Rs 26 with a stop loss of Rs 17.
Container Corporation of India (Concor) | Buy | LTP: Rs 314.35 | Target: Rs 350 | Stop loss: Rs 260 | Upside: 11%
In a matter of fewer than 2 months, Concor corrected more than 50 percent from the peak of Rs 600 and registered the low of Rs 262 in the recent session.
During the process, the stock retested Rs 265-mark, which is the placement of the 100-quarter exponential moving average.
The support of 100-quarter exponential moving average has never been breached since the year 2003 and the stock rebounded sharply from there.
Any dip from here is a buying opportunity for the short-term traders till the stock stays above that level.
Traders are advised to buy the stock on a dip near Rs 290 for the target of Rs 350 with a stop loss of Rs 260.
Infosys | Sell | LTP: Rs 640 | Target: Rs 530 | Stop loss: Rs 710 | Downside: 17%
Recently, there was a breakdown in Infosys below the Rs 630-mark from a pattern that resembled a bearish head and shoulder.
Thereafter, the stock tumbled towards Rs 520-mark and is now again above Rs 630 levels.
The theoretical target of the pattern is placed around Rs 450 and the recent rise could be just a pullback of the fall.
The reward-to-risk ratio looks highly lucrative to go short for short-term traders. Traders are advised to sell the stock on near Rs 650 for the target of Rs 530 with a stop loss of Rs 710.
(The author is Senior Technical Analyst, IndiaNivesh Securities)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.