Nifty started the week on a bearish note with a fall of more than 3 percent in a single session on April 12.
This was the largest single-day fall since February 26, 2021. Bank Nifty underperformed by a huge margin by plunging 5 percent.
For Bank Nifty, it was the highest one-day fall since May 18, 2020, which is a big development.
Nifty Midcap and Smallcap indices witnessed a sharp cut of more than 5 percent each. IT index saw a profit booking before TCS results.
Nifty has violated the crucial support of 14,264, which happens to be the previous swing low on the daily charts.
It is now placed below its 20 and 50 days exponential moving average (EMA), indicating a bearish trend for the short term.
Support derived from the upward sloping trendline, adjoining the bottoms of January 29, 2021, and March 25, 2021, has been violated on a closing basis which has confirmed the bearish trend reversal for Nifty.
On April 12, Nifty saw a gap down opening and left an unfilled gap between 14,652 and 14,785. This gap is expected to remain resistance zone for the coming weeks.
Unless this gap is filled entirely on a closing basis, the trend of the market would remain bearish for the short term.
Bank Nifty looks weaker than Nifty and all set to head towards the next downside target of 29,750, which happens to be 200-day EMA for the same.
Sectors that are looking strongest on the medium to long-term charts and are expected to outperform in the coming weeks are pharma, healthcare, diagnostics, IT and chemical.
Earnings season has started and there could be stock-specific movement ahead of the result announcements.
In the worst-case scenario, Nifty could continue its downward journey towards the major swing low of 13,600 odd levels.
Here are three buy calls for the next 3-4 weeks:
Fine Organic Industries | Buy | LTP: Rs 2,511.20 | Target price: Rs 2,990 | Stop loss: Rs 2,250 | Upside: 19%
The stock took support at the long-term upward sloping trendline, adjoining the major bottoms on the weekly chart and reversed north.
It has broken out from the downward sloping trendline on the weekly charts.
Volumes have registered a good rise during the price breakout. The chemical sector has been outperforming for the last many months.
It has been trading above all important moving averages which indicate an uptrend on all timeframes.
Indicators and oscillators like RSI and MACD have turned up on the short-term charts.
AstraZeneca Pharma | LTP: Rs 3,379 | Target price: Rs 3,990 | Stop loss: Rs 3,050 | Upside: 18%
The stock has reversed its trend from south to north after taking support on the upward sloping trendline, which adjoins March 2018, Aug 2019 and March 2020 major swing bottoms.
On April 1, this stock surged 14 percent with a significant jump in volumes, which confirms the trendline support and trend reversal as well.
The pharma sector has been outperforming and the MNC index also looks stronger on the medium to long-term charts.
The stock has surpassed the resistance of 20-day EMA. Weekly RSI has just exited the oversold zone which indicates good upside in the stock from the current levels.
Metropolis Healthcare | LTP: Rs 2,475.30 | Target price: Rs 2,800 | Stop loss: Rs 2,160 | Upside: 13%
This stock has surpassed the multiple top resistance placed at Rs 2,315. The horizontal trendline has been taken out with a jump in volume.
It has been forming higher tops and higher bottoms and trading above all important moving averages.
Indicators like DMI and MACD have turned bullish on the short-term charts.
(The author is a technical research analyst at HDFC Securities)Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.