By Vinay Rajani, CMT, Senior Technical and Derivative Analyst at HDFC Securities
Last week, Nifty closed on a weak note with Shooting Star pattern on the weekly chart. However, this pattern validates only when the low of the candle is broken, which is not the case as of yet. Primary trend of the Nifty is bullish as Nifty has been holding above its 20, 50, 100 and 200-day EMA (exponential moving average). 20 DEMA for Nifty is currently placed at 18,465 and unless this is broken on the downside, we expect Nifty to remain in the bullish trend for the short term.
The important factor which is shaping up in the current market trend is strong breadth. At present, more than 69 percent of NSE500 stocks are placed above their respective 200 DMAs (daily moving average). Number of stocks hitting new 52-week highs in NSE 500 is also rising. Moreover, both of these numbers are still at a distance from the overbought zones. Nifty Smallcap index has been rising for last 11 consecutive weeks.
From the derivative side, Put-Call Ratio is placed below 1, which is not overbought yet. FII’s Long to short ratio in the Index future is at 0.86, which shows that FII’s still carrying more shorts than longs. Any positive cue from the global markets could trigger fresh short covering by FIIs in the Index futures.
Considering the evidences discussed above, we believe that though the momentum has come down a bit in the Index, Nifty is still in to continuation of an uptrend. Short term traders are advised to hold on to the longs with the stop-loss of 18,465 in the Nifty. On the higher side, we expect Nifty to rise towards 18,887 and 19,000 in the current month.
Here are three buy calls for short term:
Firstsource Solutions: Buy | LTP: Rs 132.90 | Stop-Loss: Rs 121 | Target: Rs 153 | Return: 15 percent
The stock price has resumed its uptrend after five-week’s consolidation. Stock is placed above all important moving average, indicating bullish trend on all time frames.
Indicators and oscillators like MACD (moving average convergence divergence) and RSI (relative strength index) have turned bullish on its weekly charts. Stock price has been holding higher tops and higher bottoms on weekly and monthly chart.
Midcap IT as a sector has been outperforming and the same is expected to continue.
NESCO: Buy | LTP: Rs 646.80 | Stop-Loss: Rs 600 | Target: Rs 710-750 | Return: 16 percent
Primary trend of the stock has been bullish as it has been forming higher tops and higher bottoms on weekly charts. Stock price is placed above all important moving averages, indicating bullish trend on all time frames.
Price rise is accompanied by jump in volumes. Indicators and oscillators have turned bullish on daily and weekly charts.
Hikal: Buy | LTP: Rs 315.2 | Stop-Loss: Rs 301 | Target: Rs 342 | Return: 8.5 percent
On June 2, the stock broke out from the down trendline on the daily chart. Post breakout stock registered some gains and fell in to running correction.
The stock is placed above strong support of its 50-day EMA. Indicators and oscillators like MACD and RSI have turned bullish on its daily charts.
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