Rohan Patil
After witnessing a positive breakout of a pennant pattern, the benchmark index Nifty went through a sharp decline and left a long trailing trail candle with closing inside the pattern on the daily chart on April 8.
It was a roller-coaster day for the Nifty. Among the sectoral indices, Nifty Pharma, Auto and Media managed to hold the gains while Bank, Financial Services, Realty, Metal and IT remained under pressure.
For the past two trading sessions, the breadth of the market has been in the favour of bulls, for every loser, there were more than three gainers.
Nifty's weekly chart does not seem to be that promising due to its straight vertical fall but momentum oscillator RSI (14) is currently below 30 level and most stocks are showing significant oversold rally, so one cannot negate a sharp oversold rally in benchmark index in coming days.
Once India VIX settles below 70 levels, there will be a decline in volatility.
On April 8, India VIX, after hitting an intraday low of 46.97, witnessed a sharp rally of almost 10 percent from the day’s low point.
Due to this sharp surge in India VIX, the market went through a roller coaster ride on April 8.
We are expecting Bank Nifty to trade in a broad range of 17,000 to 21,500 level.
A breakout on either side will give a classical consolidation range pattern breakout and will define the next level for the banking index.
Current chart formation suggests Nifty may find major support around 8,300 level which is well supported with an upward rising trend line, which is drawn by joining the lows of March 24.
However, on the higher side, the index will continue to face hurdles around 9,150 level. In the case of sharp short-covering and a pennant pattern breakout, Nifty may go to 9,650 level.
Here are three stock recommendations for the next 3-4 weeks:
The stock seems to have broken its last week’s consolidation range and is currently witnessing a pennant pattern breakout on the daily time frame.
The 200-week exponential moving average is acting as an anchor point and is one of the main reasons for the likely short-term bottom in the stock.
The counter has been forming a base near Rs 440 levels for the last few trading sessions which is supported by momentum oscillator RSI (14) which has rebounded from the oversold zone with positive crossover on a weekly interval.
Traders can accumulate the stock in a range of Rs 475-479 for the target of Rs 540 with a stop loss below Rs 440 on a daily closing basis.
ITC | Buy | LTP: Rs 178.60 | Target price: Rs 200 | Stop loss: Rs 165 | Upside: 12%
For the last couple of trading sessions, ITC has been sustaining above its horizontal trendline breakout on the daily interval.
The stock is trading above its 21-day exponential moving average and also above its four-week consolidation range on the daily scale.
This stock has been forming a base near Rs 165-170 levels for the last few trading sessions which is supported by momentum oscillator RSI (14) which has rebounded from the oversold zone with positive crossover on the weekly interval.
Traders can accumulate the stock in the range of Rs 178–179.50 for the target of Rs 200 with a stop loss below Rs 165 on a daily closing basis.
PVR | Sell | LTP: Rs 1,000.95 | Target price: Rs 820 | Stop loss: Rs 1,130 | Downside: 18.08%
PVR has breached its almost three-week-long consolidation pattern and is currently trading below its support level on a daily timeline.
Majority of indicators and oscillators are negatively poised and looking week.
The stock has drifted below its 50 and 100-day exponential moving average on the weekly timeframe, which indicates bears are in full control to push price lower.
The counter is likely to underperform the benchmark index which is visible on the Relative Strength (RS) indicator on a weekly interval.
Traders can short the stock in a range of Rs 995-1,008 for the target of Rs 820 with a stop loss above Rs 1,130 on a daily closing basis.
(The author is Technical Analyst, Bonanza Portfolio)
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