Nifty broke the two-day losing streak by rising 18 points to close at 14,956 on March 8.
Last week, the benchmark index bounced back after two weeks of correction. But the weekly candlestick shows that the index has closed well off the highs, which indicates that there was selling pressure at the higher levels.
We also observe a negative divergence on the Nifty weekly charts as the index has made a new high, but the 14-week RSI has made a lower top.
In the derivatives segment, FIIs long to short ratio fell to 1.28 level from 3.22 at which we began the March series, indicating FIIs have started reducing their longs in the index futures segment.
Immediate support for the Nifty is placed around 14,800 where we have seen Put writing. Any close below this level would mean that correction could accelerate and Nifty could attempt 14,521-14,600 levels.
If Nifty does not move above 15,250 on any pullback rally, the intermediate downtrend will remain intact.
The short-term trend of the Nifty has turned negative and one should remain cautious till it closes above 15,250.
Nifty Midcap and Smallcap indices have outperformed during the recent correction in the benchmark indices. We expect their outperformance to continue for the coming weeks.
Here are three buy recommendations for the next 3-4 weeks:
ELGI Equipments | LTP: Rs 199.45 | Target price: Rs 220 | Stop loss: Rs 188 | Upside: 10%
This stock has broken out on the daily chart where it surpassed the crucial resistance of Rs 193 to close at an all-time high.
Volumes were sharply higher as compared to the last few days. Oscillators like RSI and MFI are showing strength in the stock.
Plus DI is placed above the minus DI while the ADX is placed above 25 level, indicating momentum in the current uptrend.
Gujarat Fluorochemicals | LTP: Rs 599.50 | Target price: Rs 660 | Stop loss: Rs 566 | Upside: 10%
After breaking out from the downward sloping trendline on March 3 with a rise in volumes, this stock has witnessed a sideways correction.
The short-term trend of the stock is positive where it is trading above its 20-day EMA. Plus DI is placed above the minus DI while ADX is placed above 25 level, indicating momentum in the current uptrend.
Oscillators and momentum indicators are indicating strength in the stock. Volumes have been higher these days as compared to down days during the last few weeks, indicating accumulation in the stock.
Larsen & Toubro | LTP: Rs 1,513.65 | Target price: Rs 1,625 | Stop loss: Rs 1,455 | Upside: 7%
This stock has broken out from the downward sloping trendline, adjoining the highs of February 16 and 25 on the daily charts.
The stock closed at the highest level since February 24 with a rise in volumes. Plus DI has crossed minus DI, indicating strength in the current uptrend. Oscillators like RSI and MFI are showing strength in the stock.
(The author is a technical research analyst at HDFC Securities)
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