Nandish Shah
Nifty gained 95 points on the first day of the week to close at six months high at 11,466.45, the highest close since February 27, 2020.
Last week, Nifty took support at 20-day EMA which is placed at 11,230 currently. This support also coincides with the upward sloping trendline, adjoining the bottoms of July 14 and August 3, 2020.
This trendline is currently placed around 11,250 levels. In the Nifty options segment, we have seen Put writing at 11,200 -11,300 levels.
There are multiple pieces of evidence that suggest that Nifty is likely to find strong support in the range of 11,200-11,300 and unless the index closes below 11,200, the uptrend is still intact.
On the higher side, immediate resistance is seen around 11,550 while far resistance is seen around 11,780.
Nifty mid and small-cap indices have outperformed the benchmark indices in August so far where Nifty Midcap and Smallcap indices are up 11 percent and 15 percent, respectively, against a 3.5 percent rise in Nifty.
The advance-decline ratio has been positive for the sixteen out of seventeen trading sessions in the month of August till now.
We believe that mid and small-caps will continue their outperformance for the coming weeks and months also.
We believe that rather than anticipating the resistance or top, it is advisable to remain bullish with trailing stop loss strategy in the index as well in the stocks.
The global market technical setup is bullish and Indian markets, too, are in continuation of an uptrend.
Therefore, our advice is to remain long in Nifty with the trailing stop loss of 11,200. The focus of the traders should be on mid and small-caps that are likely to continue their outperformance in the coming weeks and months.
Here are three buy recommendations for the next 3-4 weeks:
The stock is on the verge of giving breakout above the downward sloping trendline resistance at Rs 193.
The primary trend of the stock is positive wherein the stock is trading above its 200-day EMA.
Volumes have been higher during up days while lower during down days in August so far, indicating accumulation is going in the stocks.
+DI is placed above the -DI while the ADX line is placed above 25 levels, indicating momentum in the uptrend.
Deccan Cements | Buy | LTP: Rs 309.20 | Target price: Rs 340 | Stop loss: Rs 290 | Upside: 10%
The stock has broken out on the daily chart to close at six-month high. The trend of the stock is positive as it is trading above its short and long-term moving averages.
The stock is forming a bullish higher tops higher bottom on the daily chart. Daily RSI is placed near 70 levels, indicating a bullish setup for the stocks.
+DI is placed above -DI while the ADX line is placed above 25 levels, indicating momentum in the uptrend.
Gujarat Gas | Buy | LTP: Rs 319.70 | Target price: Rs 365 | Stop loss: Rs 295 | Upside: 14%
The primary trend of the stock is positive as the stock is trading above its 200-day EMA.
Volumes have been higher during up days while lower during down days in August so far, indicating accumulation is going on in the stock.
The short-term trend of the stock is also positive as it is trading above its 5 and 20-day SMA.
Oscillators and momentum indicators like RSI, MFI and MACD are showing strength in the stock. +DI is placed above -DI, indicating strength in the uptrend.
(The author is Technical Research Analyst at HDFC Securities)
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