Nifty had formed a bearish engulfing candlestick pattern on October 15. From the high of 12,025, we saw Nifty plunging towards 11,661 on that day.
However, the next two sessions were bullish with Nifty retracing more than 61.8 percent of the entire fall of 364 points registered on October 15.
The bearish implication of the engulfing candle gets negated once we see a recovery of more than 61.8 percent of the entire fall.
In the current scenario, Nifty has done the same and negated the probable downtrend.
The index has managed to hold its level above 20, 50, 100 and 200-day moving averages, which indicates that the positional uptrend is intact and supports are not violated yet.
The DMI indicator has also been moving bullish, as +DI has been maintaining its position above –DI, with rising ADX on the daily charts.
The important development which gives the confidence that the market would move up is the technical setup of Bank Nifty, which has closed at the highest level since August 28, 2020.
Bank Nifty has broken out from the flag pattern on the daily chart, which indicates the fresh buying momentum in the banking stocks.
The next resistance for Bank Nifty is seen at 25,232 which is almost 1,000 points away from the current levels. With the stop loss of 23,750, traders should remain bullish on Bank Nifty.
Apart from the Bank Nifty, the joker in the pack could be the FMCG sector which has been correcting for the last three months.
On October 19, the Nifty FMCG index rose more than 1.5 percent and now is on the verge of breaking out from the downward sloping trendline resistance of 30,200.
It is expected that whatever rise that we see in the market from here would be backed by banking and FMCG stocks.
Short-term traders should not miss the opportunity in these sectors on the long side.
Financials and consumers combined together have more than 40 percent weight in the Nifty index and it could help Nifty to extend the gains.
Nifty has got strong support at 11,660 and it can be kept as a stop loss in long positions. Upside targets for Nifty are seen at 12,250 and 12,430.
Here are three buy calls for the next 2-3 weeks:
Bandhan Bank | LTP: Rs 322.85 | Target price: Rs 349 | Stop loss: Rs 306 | Upside: 8%
The stock has given a flag pattern breakout on the daily charts.
Volumes have gone up along with the price rise in the recent past. The stock has got strong support at Rs 306, where 20, 50 and 100-days EMA coincides.
RSI and MACD are also showing strength in the current uptrend.
The banking sector is likely to outperform in the short-term.
Nifty FMCG index is on the verge of breaking out from the crucial trendline resistance placed at 30,200.
Colgate Palmolive carries high weight in the Nifty FMCG index and is likely to participate in the rally which has resumed in the sector.
The stock has taken out crucial resistance of Rs 1,470 derived from the previous top on the daily charts.
The stock rose almost 3 percent with a significant jump in volumes on October 19. It has broken out from the last three weeks of consolidation.
Bata India | LTP: Rs 1,387.10 | Target price: Rs 1,500 | Stop loss: Rs 1,331 | Upside: 8%
The stock has broken out from the long-term congestion zone.
Moving averages have started widening after a narrow move on a daily basis. The stock has closed at the highest level since June 9.
Indicators and oscillator setup are bullish on the short term charts.
The short-term moving averages have crossed medium-term moving averages on the upside.
(The author is a technical research analyst at HDFC Securities)
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