Rohan Patil, Technical Analyst at Bonanza Portfolio
After witnessing a stellar rally from 16,700 – 17,900, Nifty50 has paused with a bearish technical setup near 17,900 levels on the daily time frame. The index formed a Bearish Engulfing candlestick pattern on the daily charts on August 19 and the prices are sustaining below the same.
In terms of broader pattern, the benchmark index has formed a Bearish Shark Harmonic pattern on the daily scale near 17,900 levels and is currently trading below its potential reversal zone (PRZ).
On August 24, Indian bourses opened with a bearish to sideways note following global peers and continued to trade within a very narrow range and were not able to fill the gap created on August 22 near 17,700 levels.
The index has taken support near its 21–day exponential moving average which is placed at 17,366 levels on the daily time frame. The momentum oscillator RSI (relative strength index - 14) has reversed from the higher overbought levels and has settled below 70 levels with bearish crossover.
Immediate support for Nifty is placed at 17,350 and below those 17,200 levels. The upside resistance is capped near 17,850 & 18,000 levels.
Here are two buy calls for next 2-3 weeks:
Kirloskar Oil Engines: Buy | CMP: Rs 195.85 | Stop-Loss: Rs 186 | Target: Rs 210 | Return: 7 percent
The prices witnessed a rectangle pattern breakout on August 19, which was placed above Rs 180 level weekly time frame. The stock has closed above its neckline support which is an additional confirmation for the pattern.
The prices are also sustained above its 21-day exponential moving average which is placed at Rs 160 levels. The counter is also trading near the upper band of the Bollinger band indicating a possible continuation of the uptrend after the recent consolidation.
Momentum oscillator RSI (relative strength index 14) is reading in a higher high higher bottom formation on the daily as well weekly time frame. MACD (moving average convergence and divergence) indicator has crossed above its line of polarity on the weekly chart and indicates a rise in momentum.
Tata Coffee: Buy | CMP: Rs 232.55 | Stop-Loss: Rs 223 | Target: Rs 247 | Return: 6 percent
The prices witnessed a rectangle pattern breakout on August 24, which was placed above Rs 229 levels on the daily time frame. The stock has closed above its trendline support which is an additional confirmation for the pattern. Above average volume activity was also witnessed during the breakout.
The prices also sustained above 21-day exponential moving average which is placed at Rs 219 levels. The counter is trading near the upper band of the Bollinger band indicating a possible continuation of the uptrend after the recent consolidation.
Momentum oscillator RSI (14) has taken support near 50 levels and has shown strong rebound towards 60 levels with positive crossover on the cards on the daily scale. The MACD is also sustaining above its line of polarity.
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