The Nifty50 ended in green for the fourth consecutive week, to close at 17,698. From the bottom of 15,183, registered in June 2022, the Nifty has surged almost 17 percent towards 17,725. Metal, PSU Bank and Auto have been the leaders in this rally, while indices like Pharma, IT and Healthcare have been laggards, which underperformed the benchmark.
The Nifty has now reached the crucial resistance zone of 17,750-17,800, derived from downward sloping trend line, which adjoins the major swing highs on the weekly chart. Number of stocks above their respective 200 DMA (days moving average) have reached very near to 50 percent for NSE500 index. A reading above 50 percent, indicates strong breadth which in turns signals bullish trend for medium to long term.
Oscillators like RSI (relative strength index) and MFI (money flow index) have reached overbought zone on the daily chart. However, there is no trend reversal confirmation on the price chart. Oscillators may remain overbought for longer period in the bull markets and price could continue to extend the gains. So, unless we see, the Nifty breaching crucial supports, we should not try to anticipate top in the market.
Put Call ratio for the Nifty is placed at 1.24, which is still at a good distance from the overbought zone. FIIs long to short ratio in index future has reached above 1.25, which indicates that though FII have turned net buyers in Index futures, long short ratio has not reached to the elevated levels. If we were to go by the history, this ratio went to as high as 3 and average ratio of long to short has been around 2.
We believe that though the Nifty has reached the trend line resistance zone of 17,700-17,800, probability of the benchmark surpassing this hurdle seems high. The Nifty should be held long with the stop-loss of 17,400 and same should be trailed as the rally extends. Above 17,800, it could hit the next target of 18,100.
Here are three buy calls for next 2-3 weeks:
Exide Industries: Buy | LTP: Rs 159 | Stop-Loss: Rs 150 | Targets: Rs 182-195 | Return: 22 percent
The stock has broken out from the downward sloping channel on the weekly line chart. Breakout is accompanied with rising volumes. Indicators and oscillators have turned bullish on the weekly chart. The stock has been forming higher top and higher bottom on the daily chart.
Gujarat State Fertilizers & Chemicals: Buy | LTP: Rs 159.65 | Stop-Loss: Rs 149 | Targets: Rs 181-196 | Return: 23 percent
On July 22, 2022, GSFC has seen a break out from the downward sloping trend line resistance. After breakout, the stock has been consolidating for last couple of weeks with low volumes. It is placed above all important moving averages, which indicates bullish trend on all time frames.
Finolex Cables: Buy | LTP: Rs 436.10 | Stop-Loss: Rs 410 | Target: Rs 475-499 | Return: 14 percent
The stock price has been forming higher tops and higher bottoms on the daily chart. It has registered fresh 6 months high with rising volumes.
Indicators and oscillators have turned bullish on weekly charts. On August 12, the stock has seen a break out from the consolidation, which held for previous 7 trading sessions.
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