Nandish Shah, Senior Derivative & Technical Analyst at HDFC Securities.
The Nifty, after running correction of nearly 5 percent during last few sessions, resumed its uptrend as it closed above its 5-day and 20-day EMA (exponential moving average). It has also broken out from the downward sloping trendline, adjoining the highs of October 19 and October 27, 2021.
During the recent correction, the Nifty took support at 10-week EMA and bounced back. The index has never closed below its 10-week EMA since May 2021, which is placed at 17,700-odd levels. In the Option segment also, we have seen Put writing at 17,700-17,800 levels, indicating 17,700 levels to act as a strong support going forward.
Therefore, we believe that though the Nifty has witnessed some correction, it remains in an intermediate uptrend till it is trading above the important support level of 17,700.
While we remain open to further upsides, a short-term trend reversal would be confirmed only if the Nifty closes below the 17,700. Therefore, for traders our advice is to remain bullish and accumulate longs on declines with the stop loss of 17,700 levels.
On the higher side, the Nifty is likely to find immediate resistance at 18,342 and 18,600 levels.
The Nifty Smallcap and Midcap indices have broken out on the daily chart to close at highest level since mid-October. We believe that there is more upside left for small-cap/mid-cap stocks and they may continue their outperformance for the coming weeks and months.
To conclude, the short-term trend remains positive for the Nifty. Next upside targets for the Nifty is seen around 18,350, followed by 18,600. Longs should be protected with a stop loss of 17,700.
Here are three buy calls for the next 2-3 weeks:
Anjani Portland Cement: Buy | LTP: Rs 408.25 | Stop Loss: Rs 385 | Target: Rs 450 | Return: 10 percent
The stock price has broken out on the daily chart with higher volumes to close at the highest level since October 7. The stock price has already broken out from the downward slopping trendline, adjoining the highs of August 4 and October 6.
Daily RSI (relative strength index) is placed above 60 and in the rising mode, indicting strength in the current uptrend of the stock. Plus, DI (Directional Indicator) is placed above the Minus DI while ADX line (Average Directional Index) is placed above 20, indicating stock is likely to gather momentum in the coming days.
Fineotex Chemical: Buy | LTP: Rs 129 | Stop Loss: Rs 120 | Target: Rs 145 | Return: 12 percent
The stock price has already broken out from the downward slopping trendline, adjoining the highs of September 16 and October 6. Primary trend of the stock is positive as it is trading above its 20, 50 and 100 day EMA.
Plus, DI is placed above the Minus DI while ADX line has started slopping upwards, indicating stock is likely to gather momentum in the current uptrend. Daily RSI and MFI line (Money Flow Index) have witnessed trend line breakout, which is bullish development for short term.
Karnataka Bank: Buy | LTP: Rs 71.7 | Stop Loss: Rs 68 | Target: Rs 79 | Return: 10 percent
The stock price is on the verge of breaking out from the downward slopping trendline, adjoining the highs of October 19 and October 27. Daily RSI has reached near 60 and in rising mode which is bullish development for short term.
Accumulation was seen in the stock in the last few months where volumes are higher during the up days as compared to down days. Once this accumulation is over, we expect the stock to witness sharp up move.
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