Nandish Shah, Senior Derivative and Technical Analyst at HDFC Securities
After a sharp rally of nearly 4 percent last week, the Nifty fell 170 points on March 21 to close at 17,118 levels on the back of selling mainly in auto, banking and FMCG stocks.
Last week, the Nifty confirmed a reversal of the previous downtrend by moving above the swing high of 16,816. The index has also broken out from the downward sloping trend line, adjoining the highs of January 18, February 10 and February 17. Moreover, Nifty managed to surpass 200-day EMA (exponential moving average) which is placed at 16,705 levels.
Momentum oscillators like RSI (relative strength index) and MFI (money flow index) are showing strength as they have witnessed breakout from the downward sloping trendline.
In the Index Futures segment, FIIs have created fresh longs during the last week, where their net long to short ratio has moved up to 1.34 level from 0.76 levels. In the Option segment we have seen aggressive Put writing at 16,800-17,000 levels. This level also coincides with the 11 and 20 day EMA which is placed around 16,800 levels. Therefore, we believe that short term trend will remain bullish till Nifty is trading above 16,800 levels.
Nifty Midcap and smallcap Indices have outperformed the benchmark indices during the CY22 and we expect their outperformance to continue for the coming weeks. Focus of the traders should be on the Midcaps to generate higher returns we believe.
To conclude, short term trend turned positive for Nifty. Immediate target for Nifty is seen around 17,600 levels, followed by 18,000 levels. Longs should be protected with stop-loss of 16,800 levels. Amongst the sector, IT, Metal and Pharma are likely to outperform for the comings weeks.
Here are three buy calls for the next 2-3 weeks:
Indoco Remedies: Buy | LTP: Rs 410 | Stop-Loss: Rs 385 | Target: Rs 460 | Return: 12 percent
The stock price has broken out from the downward sloping trendline, adjoining the highs of October 20, 2021 and January 3, 2022. Primary trend of the stock turned positive as it closed above its 200-day EMA.
Short term trend of the stock remains positive as it is trading above its 5 and 20 day EMA. Oscillators like RSI and MFI are showing strength in the current uptrend of the stock.
Indian Metals & Ferro Alloys: Buy | LTP: Rs 436 | Stop-Loss: Rs 410 | Target: Rs 480 | Return: 10 percent
The stock price has broken out from the downward sloping trendline, adjoining the highs of December 29, 2021 and March 8, 2022 with higher volumes. Stock price is trading above its all-important short and medium-term moving averages.
Plus DI (directional indicator) is trading above Minus DI while ADX (average directional index) line is placed around 30, indicating momentum in the current uptrend.
Oscillators like RSI and MFI are showing strength in the current uptrend of the stock. Metal stocks are looking good on the charts for the medium term.
Globus Spirits: Buy | LTP: Rs 1,473 | Stop-Loss: Rs 1,420 | Target: Rs 1,590 | Return: 8 percent
The stock price has broken out from the symmetrical triangle on the daily chart with higher volumes where it closes at highest level since February 4, 2022. Stock price has also broken out from the downward sloping trendline, adjoining the highs of January 14, 2022 and March 10, 2022.
Momentum Oscillator like RSI and MFI has witnessed trendline breakout indicates higher possibility of a sharp rise in the prices in the coming days.
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