Indian equity benchmarks extended their previous session's losses with a negative start on Wednesday mirroring weakness in the global markets.
In the afternoon session, Indian equity benchmarks continued to trade in the red zone and closed one percent lower below 14,750 levels.
The Nifty50 on the daily chart continues to trade in a downward sloping channel pattern and the width of the channel is almost a thousand points, henceforth, prices are trading within a band of 14,100 to 15,100 levels.
The index has broken out of the Rising channel pattern on the weekly chart and has most likely completed its pullback near its trend line resistance.
After trading within the rising channel pattern for more than 12 months, the index registered a decisive breakdown that suggests prices may continue to trade below their trend line resistance.
India VIX is reading in a range between 16.50 – 24 levels and currently hovering around 20.08 levels. If VIX moves above 23, then it might test the upper band of the channel at 25 levels.
Indian bourses on the daily chart are trading above their 100-day exponential moving average which is placed above the lower band of the channel pattern acting as a crucial support zone for the index.
Momentum oscillator RSI (14) is reading near 50 levels on the daily chart and the MACD indicator also closed above its centerline with a positive crossover.
We expect Nifty to trade with a sideways to negative bias as prices have taken a stiff resistance near the upper band of the pattern.
Support for the Index is placed at 14450 levels while resistance rests near 14950 post-break of the level will open the gate for 15100 levels.
Here is a list of trading ideas for the next 3-4 weeks:
MGL: Buy | Target: Rs 1190 | Stop Loss Rs 1099
The prices were trading in a symmetrical triangle pattern for the past twelve months. It also traded within a broad consolidation on the weekly chart.
MGL has given a decisive break out from a Symmetrical Triangle pattern and is currently hovering above the upper band of the triangle pattern on the weekly interval.
The stock is trading above the 100-Days exponential moving average on the daily time frame, which is positive for the prices in the near term. Currently, RSI is reading near 50 levels with a bullish crossover, which indicates that the bullish momentum will likely continue in the near term.
Maruti Suzuki: Buy | Target: Rs 7300 | Stop Loss Rs 6540
The prices were trading in a falling wedge pattern for the past four months and it also followed lower bottom lower high formation on the daily chart.
Maruti has given a decisive break out from the falling wedge pattern and is currently hovering above the upper band of the falling wedge pattern on the daily interval.
Prices on the daily chart have also completed a Bullish Bat Harmonic pattern and currently, prices are trading above their potential reversal zone (PRZ).
When we observe volume activity. There has been an above-average volume set up for the past few days. The Momentum oscillator RSI (14) has given a trend line breakout which was placed at 40 levels and currently indicator is reading at 50 levels.
Cipla: Buy | Target: Rs 1050 | Stop Loss Rs 959
Cipla on the weekly chart is trading in a rising channel pattern and it is clubbed with a higher high higher low formation. Prices are trading above the horizontal trend line on the weekly chart which is acting as strong support for the counter.
The prices have retraced near the 50 percent levels from their previous intermediate low which is an important support level for the counter.
The counter is trading above its 50 & 100-day exponential moving averages on a daily as well as weekly time frame, which is positive for the prices in the near term.
(The author is Technical Analyst, Bonanza Portfolio Ltd)
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