Vinay Rajani
Last week, benchmark indices and all sectoral indices formed either bullish engulfing or piercing line candlestick patterns on their weekly charts.
Nifty formed a bullish piercing line while Bank Nifty formed a bullish engulfing candlestick pattern. Both of these candlestick patterns are having bullish reversal implications and should not be ruled out even after their recent spike.
On January 20, 2020, Nifty registered an all-time high at 12,430 and ended the same session with a bearish engulfing pattern on the daily charts.
Bank Nifty also formed the same bearish formation on that day. Now, on the week ended February 7, 2020, both benchmark indices formed bullish reversal patterns of piercing and engulfing on the weekly charts.
So, as far as the sustainability of the trend is concerned, the bullish candlestick pattern - which has developed on the weekly chart recently - should be given higher importance than the earlier bearish candlestick pattern witnessed on the daily chart.
From the bottom of 11,614, registered on February 3, 2020, Nifty has risen 546 points to 12,160 and that too within the span of 4 sessions.
A 38.2 percent retracement of this swing gives the support at 11,950 odd levels. There could be the chances of well-deserved consolidation or running a correction in the coming days.
However, the corrections are advised to be bought.
Weekly pivot level for Nifty is placed at 11,958, which also coincides with 38.2 percent retracements.
Positional support for Nifty is seen at 11,800-odd levels, while resistance for the same is seen at 12,272 and 12,430.
To conclude, we expect the market to do well this week. Momentum could go down but the direction would remain the same as it was there in the last week.
The breadth of the market is expected to remain strong. Running correction cannot be ruled out in benchmark indices but the same should be utilised to create long positions.
Here are three buy calls for the next 3-4 weeks:
Tata Chemicals | Buy | LTP: Rs 764.40 | Target: Rs 825 | Stop loss: Rs 735 | Upside: 7%
For the last three weeks, the stock price has been consolidating in the narrow range. The primary trend of the stock has been bullish and the stock rallied from Rs 543 to Rs 771 since August 2019.
The stock is placed above all important moving average parameters. The stock is on the verge of registering fresh all-time high above Rs 787.50.
Wockhardt | Buy | LTP: Rs 364.65 | Target: Rs 393 | Stop loss: Rs 350 | Upside: 7%
The stock has broken out from a bullish pennant pattern on the daily charts.
Volume during the breakout is much higher than the previous week’s average volume. The stock is placed above all important moving average parameters. The oscillator setup has also been bullish on the daily and weekly charts.
Galaxy Surfactants | Buy | LTP: Rs 1,640 | Target: Rs 1,800 | Stop loss: Rs 1,550 | Upside: 10%
The stock has registered a new 52-week high on the closing basis with higher volumes. The stock has also broken out from bullish cup and handle pattern on the daily charts.
The primary trend of the stock has been bullish with higher tops and higher bottoms. Moving average and oscillator setup is bullish on the daily and weekly charts.
(The author is Senior Technical and Derivative Analyst at HDFC securities)
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