Nifty has been forming a lower low lower high pattern and moving lower ever since it faced rejection near the 14,753 mark.
On January 28, the index tested a low of 13,713.
The correction seems to be broad-based as the midcap, smallcap and most of the sectoral indices seem to be moving lower with the benchmark index.
On the open interest front, the highest participation is seen at the 13,500 Put options and 14,000 Call options. We can expect the broader range of the index to be between 13,500-14,000.
Nifty remains above the 50, 100 and 200-day SMA. The ADX is moving lower as the prices fall which points towards the weakness in the trend.
The index seems to be moving lower in a corrective form. The key support levels to watch out for in the short-term are 13,750 which is a 61.8 percent retracement level of the rise from 13,131-14,753.
It is followed by 13,478 which is a 78.6 percent retracement level of the rise from 13,131-14,753.
On the upside, the key resistance levels are 14,000-14,100. If the index sustains above this level, we might see the index head higher towards 14,450-14,753.
Currently, the index is in a corrective phase and we expect the correction to halt at 13,750 which also happens to be the 50-day SMA.
If the correction halts, we can expect the index to resume its up-move and go higher towards 14,000-14,100.
Beyond these levels, we might see the index test the previous swing high of 14,753.
The above analysis will not hold the trend if the index breaches and closes below the 13,750 mark. If this level is breached, we might see the correction accelerating and can expect a test of 13,478 mark.
Here are three buy calls for the next 3-4 weeks:
Tata Motors | LTP: Rs 266 | Target price: Rs 306 | Stop loss: Rs 231 | Upside: 15%
Tata Motors currently seems to be moving lower in a corrective phase after a strong rally from Rs 156 to Rs 306.
This is confirmed by the dropping volume as the prices move lower.
The dropping ADX line on the short-term charts shows that the down-move lacks strength.
The RSI plotted on the shorter timeframe can be seen moving lower, pointing towards the presence of bearish momentum in the stock.
Based on the price action analysis on the medium and the longer timeframes, we can say that the longer-term trend of the stock remains bullish.
However, the short-term charts point towards the possibility of a correction.
On the downside, the key support level is placed at Rs 250 which is a 50 percent retracement level of the rise from Rs 156 to Rs 306, followed by Rs 231 which is a 61.8 percent retracement level of the rise from Rs 156 to Rs 306.
On the upside, the key resistance levels are Rs 280, followed by Rs 306. One can buy the stock on dips till Rs 250 with a target of Rs 280, followed by Rs 306.
Cummins India | LTP: Rs 639 | Target price: Rs 723 | Stop loss: Rs 600 | Upside: 13%
This stock seems to be resuming its up-move after bouncing off Rs 583 level. The counter has been forming a higher high higher low pattern for the past two weeks.
The up-move witnessed in the counter is backed by above-average volume, indicating participation in the up-move.
The MACD plotted on multiple timeframes can be seen placed above the zero line which indicated that the stock is in an up-move trend.
RSI plotted on multiple timeframes has been rising consistently, indicating a bullish trend.
Going ahead, the key levels to watch out for on the upside are Rs 651 which is the recent swing high, followed by Rs 714-723.
The red flag level for the counter is Rs 600. One can buy the stock at the current levels with a target of Rs 651, followed by Rs 723.
Cipla | LTP: Rs 840.30 | Tagret price: Rs 1,000 | Stop loss: Rs 793 | Upside: 19%
Cipla has been one of the outperformers in the pharma space for quite some time.
For the last few sessions, the stock has been holding above 50-day SMA. The analysis of the price action of multiple timeframes indicates that the stock is in a bullish phase.
The RSI plotted on the shorter and the longer timeframes can be seen placed above the 50 mark, indicating bulls are still in control of the trend.
The immediate resistance is placed at Rs 887 which is a 38.2 percent extension level of the rise from Rs 355 to Rs 829, followed by Rs 943 which is a 50 percent extension level of the rise from Rs 355 to Rs 829 and eventually towards Rs 1,000 which is 100 percent extension level of the rise from Rs 355 to Rs 829.
The key support levels are Rs 815 and Rs 793. One can buy the stock at the current level and add on dips till Rs 815 with a target of Rs 887, followed by Rs 943 and Rs 1,000.
(The author is a technical analyst at GEPL Capital)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.