Nifty50 has been trapped in a very narrow range for the last three trading sessions. It has formed three small candles with a spinning top on the daily timeframes which signifies indecision.
Since July 28, the benchmark index has been trading in a rising channel pattern and has continued to trade in a higher top higher bottom formation.
Momentum oscillator RSI (14) is in an overbought zone which is above 70 level on the daily chart.
Whenever any index or any stock is in a bull run and RSI shows an overbought scenario, one can expect a sideways time-wise correction in the counter.
Support for Nifty is placed at the lower band of the rising channel pattern which is placed near 17,000 on the daily timeframe.
Resistance is capped under the upper band of the pattern and the breakout above 17,450 will open the gate for 17,600 in the coming trading sessions.
After a breakout above its rectangle pattern, Bank Nifty has most likely completed its throwback near its trendline support on the daily timeframe.
The change of polarity concept is seen at the current juncture as the earlier resistance level is acting as an immediate support zone for the banking index.
Support for Bank Nifty is placed near 36,100–36,000 and the upside resistance is likely to be capped near 37,500.
Here are three buy calls for the next 2-3 weeks:
Canara Bank | LTP: Rs 157.75 | Target price: Rs 169 | Stop loss: Rs 152 | Upside: 7%
The stock had been trading within the symmetrical triangle pattern for the last six months within the range of Rs 135–Rs 152 on the weekly timeframe.
It broke out of a symmetrical triangle pattern at Rs 488 on September 3 and registered a decisive breakout that suggests a change in the trend from sideways to upside.
It is trading above its 21, 50 and 100-day exponential moving averages on the daily timeframe, which is positive for it in the near term.
The MACD indicator is above its centerline with a positive crossover above its signal line. Momentum oscillator RSI (14) is near 60 level which indicates positive momentum may continue.
On the daily chart, this stock took support near its 21-day exponential moving average and bounced back with volume confirmation.
Concor gave an inverted head and shoulder pattern breakout on the daily interval on September 2 and it has been able to close above its neckline support.
It has sustained near its lifetime high which confirms the strong positive sentiments for the medium to long term.
Due to the recent smart rally, it has been able to close above its 21 and 50- day exponential moving averages on the daily scale.
Most indicators and oscillators have shown positive divergence with the higher high formation on the daily chart.
The momentum is likely to continue as depicted on the weekly charts. The price setup looks promising where a cup pattern is visible.
On the indicators front, MACD line has shown a positive crossover on daily charts and the ADX is showing a reading of 19.60 with a rising trend.
RSI is yet to enter into overbought territory, indicating an upside potential is still left for the stock.
A falling trendline breakout is also visible, signalling that the trend on the downside has been arrested.
On the moving average front, the stock is trading well above its 21-day exponential moving average.
(The author is a technical analyst at Bonanza Portfolio)
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