Nandish Shah
The Nifty 50 recovered nearly 300 points from the day's low to end higher, in a big swing on May 13. At close, the Nifty was up 49 points, at 22,104. During the last seven trading sessions, the index has fallen nearly 1,000 points from the high of 22,795 to the low of 21,821.
The Nifty closed with a bullish `Hammer' candlestick pattern on the daily chart, indicating a short term bullish trend reversal, and seems to have found support from the bottom of the horizontal channel. Moreover, in derivatives, aggressive Put writing was seen at 21,800-22,000 levels. Therefore, the low of 21,821 registered on Monday would remain the support for the Nifty in the short term
On the higher side, the 22,265-22,310 band will act as a strong resistance, where the 11 and 20-day EMAs (exponential moving average) are placed. Broadly speaking, the Nifty is in the 21,800-22,300 range. Any close below 21,800 or above 22,300 would dictate a clear trend. Therefore, traders are advised to hold longs with a strict stop-loss at 21,800 levels. The upside momentum is likely to accelerate once the resistance of 22,310 is broken.
Broad market indices like the midcap and smallcap are in a corrective mode as both indices have broken below the upward sloping trendline. One may wait on the sidelines and look for an opportunity to accumulate select mid and smallcap stocks post further correction.
Here are three buy calls for the next three-four weeks:
Techno Electric & Engineering Company: Buy | LTP: Rs 1,038.55 | Stop-Loss: Rs 976 | Target: Rs 1,112/1,170 | Returns: 13 percent
The stock's price has been showing relative strength during the correction in the mid / smallcap space, where it is trading near all-time highs. The primary trend of the stock is positive, as it is trading above its important medium and long-term moving averages.
Momentum indicators and oscillators like MFI (money flow index) and RSI (relative strength index) are sloping upwards, and are placed above 60 on the weekly chart, suggesting strength in the current bullish trend.
Maithan Alloys: Buy | LTP: Rs 1,217 | Stop-Loss: Rs 1,145 | Target: Rs 1,297/1,350 | Returns: 11 percent
The stock's price has broken out from the downward sloping trendline on the weekly chart, adjoining the highs of April 13, 2022, and December 22, 2023.
The stock has seen accumulation over the last few weeks, and volumes are higher on up days compared to down days. The primary trend of the stock is bullish as it has been trading above the 100 and 200-day EMAs. The metals sector is looking strong on the short-to-medium-term charts.
Religare Enterprises: Buy | LTP: Rs 219 | Stop-Loss: Rs 208 | Target: Rs 234/245 | Returns: 12 percent
After forming multiple bottoms around Rs 210-odd levels, the stock's price headed north to close at the highest level of the month of May. The short-term trend of the stock has turned positive as it has closed above its 5 and 11-day EMA.
Momentum indicators and oscillators like MFI and RSI have started sloping upwards, suggesting higher possibility of a bullish trend reversal.
The author is Senior Research Analyst at HDFC Securities.
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