Nandish Shah
Nifty continued its northward journey for the third day in a row to close at 10,311 levels, the highest since March 11.
On the weekly chart, the index has formed a piercing pattern. This pattern is a two-candlestick price pattern that marks a potential short-term reversal from a downward trend to an upward trend.
Also, the breakout of the 9,726-10,047 trading range and the last Thursday's and Friday's up move that saw Nifty moving up further and closing near the highs of the week, indicates that the intermediate uptrend is intact.
Technical indicators are giving positive signals as the 14-week RSI at 51, indicates that the intermediate uptrend is not overbought and still has more steam left. The 13-day SMA continues to trade above the 50-day SMA.
Earlier resistance of 10,050 level would interchange its role as a support. In the derivatives also, we have seen Put writing at 10,000 levels. Therefore, 10,000-10,050 level would act as immediate support for the Nifty.
Resistance is seen around 10,550 level which is the 61.8 percent retracement of the entire fall seen from 12,430 to 7,511.
As Nifty has already risen more than 8 percent from the low made on June 12, the index may move up gradually but the focus of the traders should continue to be on the mid-cap stocks.
The Nifty advance-decline ratio is positive for the 16 out of the last 20 days, indicating market breadth has improved significantly and that too with a sharp rise in cash market volumes.
After consolidation for the ten days, Nifty Midcap and Smallcap 100 indices have already broken out on the daily chart last Friday.
Nifty Midcap and Smallcap indices are still down by more than 30 percent and 50 percent, respectively, from their respective highs of January 2018.
Our advice is to remain long in the Nifty with the trailing stop loss of 10,000 levels. Resistance is seen at 10,550 level.
The focus of the traders should be on midcaps and smallcaps that are likely to continue their outperformance for the coming weeks.
Here are three buy calls for the next 3-4 weeks.
Balmer Lawrie & Company | Buy | LTP: Rs 114 | Target price: Rs 125 | Stop loss: Rs 105 | Upside: 10%
The stock has broken out on the daily chart with higher volumes to close at four months high.
It has also closed above the important resistance level of 200-day SMA which is placed at Rs 111. Daily RSI (11) is placed at 70 levels, indicating a bullish setup for the stocks.
Plus DI is trading above minus DI, indicating bulls are having an upper hand. MACD line is placed above the central line, indicating a bullish setup.
NCC | Buy | LTP: Rs 31.05 | Target price: Rs 35 | Stop loss: Rs 29 | Upside: 13%
During the last week, the stock had broken out from the downward sloping trendline, adjoining the highs of 08 June and 15 June 2020.
Short term trend of the stock is positive where the stock price is trading above all its important short-term moving averages.
Daily RSI (11) is placed above 60 levels, indicating a bullish setup for the stock.
CDSL | Buy | LTP: Rs 267.65 | Target price: Rs 290 | Stop loss: Rs 252 | Upside: 8%
The stock had broken out from the downward slopping trendline during the last week, adjoining the highs of 24-Feb and 03-June 2020.
The stock has also surpassed the multiple top resistance level of Rs 265 with higher volumes last week.
After giving a breakout, the stock price is consolidating during the last three days which is a good buying opportunity.
The primary trend of the stock is positive as it is trading above its 200-day moving average. Oscillators and Momentum Indicators like RSI and MACD are showing strength in the stock.
(The author is Technical Research Analyst at HDFC Securities)
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