From the all-time high of 18,604 registered on October 19, Nifty witnessed a correction towards 17,613 till October 29, 2021. In the span of 9 sessions, Nifty registered a fall of 5 percent from the high. During this fall, Nifty registered an intermediate top at 18,342, which resulted as a lower top on the daily chart. Lower top was followed by the lower bottom below 17,968 on October 28, 2021. Nifty also breached its 20-day SMA (simple moving average) for the first time after July 30, 2021. Bank Nifty registered a fall of more than 8 percent from the all-time high of 41,829 to 38,426 in the span of 5 sessions. Though the fall was sharper in BankNifty than Nifty, Bank Nifty managed to hold above its 20-day SMA due to its higher relative strength over Nifty on the medium term chart.
On November 1, Markets bounced sharply with the gain of 1.55 percent in Nifty and 1.85 percent in BankNifty. Though markets closed near day's high on November 1, there are good chances that after adding some points small appreciation further, it could resume its downtrend. 20-day SMA is placed at 18,040 in Nifty, while 38.2 percent Fibonacci retracement of the entire 5 percent fall is placed at 17,991.
There has been second highest open interest in Put stands at 18000 strike price on the derivative side. Formation of bearish lower top and lower bottom is also well intact on the daily chart. So, all this evidence is indicating that Nifty is not out of the woods yet. However, close above 18,050, could push Nifty towards next resistance of 18,342. Any sustainable level above 18,342 would negate the possibility of a downtrend.
On the week ended October 22, Nifty Midcap and Smallcap indices formed bearish "Engulfing" patterns on the weekly charts and the pattern still stands valid. Therefore pullback rallies should be utilized to lighten long commitments in Midcap and Smallcap stocks.
BankNifty has registered a recovery of more than 3.7 percent from the last week's low, while Nifty has recovered less than 2 percent in the same period. We expect BankNifty to continue to outperform the Nifty in the coming days.
From the sectors, banks and auto look the strongest, while sectors like IT, FMCG and Pharma could see pullback rallies in the coming days due to oversold conditions on short term charts.
Considering the technical evidence discussed above, we could expect stock specific bullish moves but at the same time traders should be vigilant in booking profits at higher levels. Any level below 17,500 could drag the Nifty towards 17,000.
Here are three buy calls for next 2-3 weeks:
Federal Bank: Buy | LTP: Rs 98 | Stop Loss: Rs 91 | Target: Rs 115 | Return: 17.3 percent
The stock has broken out from a downward sloping trend line on the weekly and monthly charts. Breakout is accompanied with higher volumes. Stock has witnessed a running correction after breaking out on the long term charts.
BankNifty is expected to continue with its outperformance. Primary trend of the stock has been bullish with higher tops and higher bottoms. Stock has been holding levels above its medium to long term moving averages.
Indian Bank: Buy | LTP: Rs 172 | Stop Loss: Rs 155 | Target: Rs 200 | Return: 16.3 percent
On the week ended October 14, the stock broke out from an ascending triangle on the weekly charts. Post breakout, the stock registered follow up buying, which pushed the price to Rs 195 odd levels, from where it saw some running correction towards Rs 156 odd levels.
The stock price tested the triangle support during correction and has turned northward again. Primary trend of the stock has been bullish with higher tops and higher bottoms. Stock has been holding levels above its medium to long term moving averages.
L&T Technology Services: Buy | LTP: Rs 4,903 | Stop Loss: Rs 4,540 | Target: Rs 5,400 | Return: 10.1 percent
The stock has been one of the best performers in the IT sector. Recently, the stock showed great strength when other IT stocks were correcting.
The stock found support on its 50-day EMA (exponential moving average) and turned northward. It has been holding above its medium to long term moving averages. Stock is expected to register a new all-time high above Rs 5,549.
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