On the weekly chart, Nifty has formed a bullish higher top higher bottom pattern. A similar pattern is also observed in the Midcap and Smallcap indices, indicating broad-based rally in the markets.
Nifty continued its northward journey for the fourth day on July 6 to close at a four-month high at 10,764.
During the last week, Nifty managed to close above the 61.8 percent retracement level of the entire fall seen from 12,430 to 7,511, indicating strength in the upward rally.
On the weekly chart, Nifty has formed a bullish higher top higher bottom pattern. A similar pattern is also observed in the midcap and smallcap indices, indicating broad-based rally in the markets.
ADX (14), the trend strength Indicator, is trading above 25 levels, indicating strong momentum in the uptrend.
Earlier resistance of 10,500-10,550 would interchange its role as a support.
In the derivatives segment, we have seen Put writing at 10,500 levels. Therefore, 10,500-10,550 levels would act as immediate support for the Nifty.
On the higher side, resistance is seen around 10,900 where 200-day SMA is placed.
In the month of June, the advance-decline ratio stood at 1.54 levels which was the highest monthly advance-decline ratio since May 2009.
This Indicates that midcap and smallcap indices that outperformed the benchmark indices during the last few months after two years of underperformance starting January 2018 are likely to do well during the coming months also.
Our advice is to remain long in the Nifty with the trailing stop loss of 10,500 levels.
Resistance is seen in the vicinity of 10,900-11,000 levels. After a sharp rise in the benchmark indices during the last few days, the focus of the traders should be on midcaps and smallcaps that are likely to continue their outperformance during the coming weeks and months.
Here are three buy recommendations for the next 3-4 weeks:
The stock broke out from the downward slopping trendline last Friday, adjoining the highs of February 10 and June 22, 2020, on the daily chart with higher volumes.
It is trading above an important double top resistance level of Rs 665. Daily RSI is placed above 70 levels, indicating a bullish setup for the stock.
+DI is trading above -DI, indicating bulls are having an upper hand.
After the consolidation of the last few days, the stock resumed its uptrend by rising 5 percent with the rise in the volumes.
In the derivative segment, we have seen an aggressive build-up of long positions. Oscillators and momentum indicators like RSI and MACD are showing strength in the stock.
The stock has broken out on the daily chart to close at a 10-day high with higher volumes.
It has formed a strong base at the upward slopping trendline, adjoining the lows of March 25, May 18 and June 12, 2020.
In the derivative segment, we have seen an aggressive build-up of long positions.
Daily RSI is placed above 70 levels, indicating a bullish setup for the stock. + DI is trading above -DI, indicating bulls are having an upper hand.
(The author is Technical Research Analyst at HDFC Securities)Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.