Nifty fell more than 100 points from the intraday high to close with a loss of 24 points at 11,440 on September 14.
During last week, the benchmark index took support at 50-day SMA, which is placed at 11,200 currently, and bounced back sharply.
This support also coincides with the recent swing low of 11,185, registered on September 9.
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 around 11,200 levels and unless it closes below this level, the uptrend will remain intact.
On the higher side, immediate resistance is seen around 11,585 which is the recent swing high.
We believe that, rather than anticipating the resistance or top, it is advisable to remain bullish with a trailing stop loss strategy in the index as well as in the stocks.
The short-term trend of the index is positive where it is trading above its 5, 20 and 50-day SMA.
Our advice is to remain long in Nifty with the trailing stop loss of 11,200 levels. A move above 11,585 would give the bulls full control and it would lead to a short-covering which might push Nifty to the recent high of 11,800 levels.
The focus of the traders should be on mid-caps and small-caps that are likely to continue their outperformance for the coming weeks and months.
Here are three mid-cap buy recommendations for the next 3-4 weeks:
The stock has broken out on the daily and weekly charts with a surge in volumes to close at an all-time high level.
Oscillators and momentum indicators like RSI, MFI and MACD are showing strength in the current uptrend.
+DI is placed above the -DI while the ADX line is placed above 20, indicating momentum in the up-trend.
Rallis India | Buy | LTP: Rs 309.50 | Target price: Rs 340 | Stop loss: Rs 290 | Upside: 10%
After running correction for the last few days, the stock resumed its uptrend by closing above the downward sloping trendline with a surge in volumes.
The primary trend of the stock is positive where it is trading above its all-important short-term and long-term moving averages.
The stock is forming a bullish higher tops higher bottom on the daily chart. +DI is placed above the -DI, indicating strength in the uptrend.
Deepak Nitrite | Buy | LTP: Rs 797 | Target price: Rs 860 | Stop loss: Rs 753 | Upside: 8%
The stock has broken out from the last 10-day consolidation with a sharp surge in volumes to close at an all-time high.
The primary trend of the stock is positive where the stock is trading above its 200-day EMA.
Volumes have been higher during up days while lower during down days, during the last couple of months, 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 the -DI while the ADX line is placed above 20, indicating strength in the uptrend.
(The author is Technical Research Analyst, HDFC Securities)
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