The Nifty recovered 279 points from the day's low to close at at 17,096.30, the highest level since December 16. However, volumes have gone down as foreign institutional investors remain sluggish. The National Stock Exchange cash turnover was at its lowest since April 3, 2020.
From the recent swing low of 16,410, the Nifty has managed to recover more than 4.5 percent. It is still in continuation of a downtrend, forming lower tops and lower bottoms on the daily charts. The previous swing on the daily chart was seen from 17,640 (top of December 13) to 16,410 (bottom of December 20).
If we were to consider this downswing and apply 61.8 percent Fibonacci retracement, then that level comes in at 17,170.
If the Nifty manages to surpass 17,170 on a closing basis, it will be the first indication of bullish trend reversal. There has also been good amount of Call writing at 17,200 strike price, which indicates strong resistance.
So, unless Nifty sustains above 17,200, trend will remain down. Currently 56 percent of NSE500 stocks are trading above their 200-daily moving average (DMA), which can be considered near the lower band of the last one year data. Downward sloping trend line adjoining the previous swing highs projects the strong resistance at 17,500.
The Bank Nifty formed bullish "Piercing Line" candlestick pattern on December 27, which indicates the probability of a short-term reversal.
A level above 35,478 would trigger the buy signal of this candlestick pattern and would also result in higher top preceded by higher bottom on the daily chart.
Strong support for the Bank Nifty is seen at 34,000. Resistances for Bank Nifty are seen at 35,800 and 36,220.
Indicators and oscillators like Moving Average Convergence Divergence (MACD) and the Relative Strength Index (RSI) have developed positive divergence on the short-term chart of the Nifty as well as the Bank Nifty.
We believe that markets are on the path to recovery, however, the short-term bullish trend reversal would be confirmed only above 17,170. The medium-term downtrend would be negated once we see the Nifty closing above 17,500.
Here are three buy calls for next two-three weeks:
Gland Pharma: Buy | LTP: Rs 3,895.65 | Stop-Loss: Rs 3,600 | Target: Rs 4,390 | Return: 12.7 percent
Downward sloping trend line breakout has been seen on the weekly chart. Price has broken out from the last eight week's consolidation. Price breakout is accompanied by a jump in volumes.
The primary trend of the stock has been bullish, with higher tops and higher bottoms. It is trading above all important moving averages. The weekly RSI has registered crossover on the signal line. Weekly +DMI (Directional Movement Index) has crossed –DMI on the upside.
NIIT: Buy | LTP: Rs 422 | Stop-Loss: Rs 398 | Target: Rs 473 | Return: 12 percent
The stock is on the verge of breaking out from the last six weeks' price consolidation. The stock is about to break out from ascending triangle pattern on the daily chart.
The primary trend of the stock has been bullish with higher tops and higher bottoms on the weekly charts. Stock is placed above all important moving averages, indicating a bullish trend on all time frames. Indicators and oscillators have been showing strength on the weekly and daily charts.
L&T Technology Services: Buy | LTP: Rs 5,475.20 | Stop-Loss: Rs 5,200 | Target: Rs 5,950 | Return: 8.7 percent
The stock price has broken out from the downward sloping channel on the daily chart. The price breakout is accompanied by rising volumes. IT sector has been outperforming for the last couple of weeks and the same is expected to continue.
The primary trend of the stock has been bullish, with higher tops and higher bottoms. the stock has been holding above its medium to long-term moving averages.
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