After two days of sharp fall, the Nifty managed to recover by more than 150 points to close at 18,420 on December 19. The best part of the recovery was the strong breadth. The advance-decline ratio remained very strong as many midcap and smallcap stocks continued to perform well. Nifty Smallcap has not even breached its 20-day EMA (exponential moving average - 9,982), during recent market correction.
In Nifty 500, number of stocks above their 200 DMA (daily moving average) are still at 63 percent and slope of the trend is towards up, which is a healthy sign for bull market. On hourly chart, Nifty has formed bullish Inverted Head and Shoulder pattern, which projects the short-term target of 18,500.
On the daily chart, Nifty has formed lower top and lower bottom formation. Indicators and oscillators on the daily chart are still trading in bearish zones. Nifty is still below its 20-day EMA. These all indicates that, short term trend for the benchmark index is still down and unless we break crucial resistance on closing basis, one traders should remain cautious.
To negate the short-term bearish setup, Nifty has to close above 18,650 level. However, An intermediate trend of Nifty is still bullish and 18,100 is the crucial support, derived from the neckline of Inverted Head and Shoulder on the weekly charts.
Now in this kind of scenario, where different time frames indicate different trend for Nifty, question comes to the mind of a traders is that, the recent fall is just a correction in a bullish trend or it is a bearish trend reversal?
Looking at the strong breadth indicators, we believe that the recent correction is a buying opportunity in stocks. We don’t see, Nifty dragging down much from the current levels. We expect midcaps and smallcaps to outperform in the days to come, while index may gradually move up. The zone of 18,000-18,200 is a good support base for Nifty. Close above 18,650 could pull the index towards new all-time high.
Here are three buy calls for next 2-3 weeks:
JK Paper: Buy | LTP: Rs 425 | Stop-Loss: Rs 398 | Targets: Rs 465-490 | Return: 9 percent
The stock price is on the verge of breaking out from the narrow consolidation, which has been there for last 6 weeks. Above Rs 436, the stock would confirm the bullish trend breakout.
Primary trend of the stock is bullish, as it has been holding above all important moving averages. Paper stocks have been outperforming for last many months and the same is expected to continue.
HCC: Buy | LTP: Rs 21.35 | Stop-Loss: Rs 18.30 | Targets: Rs 24.5-27 | Return: 15 percent
The stock price has surpassed crucial resistance of its previous swing high, placed at Rs 20 on the weekly chart. It has reached above its 20, 50, 100 and 200-day EMA.
On the monthly chart, the stock has been forming higher tops and higher bottom. Infrastructure and construction space has started showing bullish momentum in the recent past, which augers well for the stock like HCC.
NLC India: Buy | LTP: Rs 91.5 | Stop-Loss: Rs 83 | Targets: Rs 99-107 | Return: 8 percent
The stock price has broken out from descending triangle on the daily chart. It has surpassed previous top of Rs 90 on the weekly chart. Volumes have been rising along with the price rise.
Primary trend of the stock has been bullish with higher tops and higher bottoms on the weekly chart. The stock is placed above all important moving averages. Indicators like MACD (moving average convergence divergence), RSI (relative strength index) and ADX (average directional index) have turned bullish on the daily chart.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
