Nandish Shah
Nifty touched an intraday high of 9,390 level on April 20 which is the 38.2 percent Fibonacci retracement level of the entire swing seen from an all-time high at 12,430 to March low at 7,511.
While Nifty retraced 38.2 percent, Dow Jones had already retraced more than 50 percent of its entire fall seen from January high to March low. A 50 percent retracement level for Nifty comes to 9,970.
RSI oscillator has been forming positive divergence for the Nifty on the daily chart. On April 7, Nifty closed above its 10-day EMA resistance level and since then it has never fallen below that. The 10-day EMA is currently placed at 8,957 which is going to act as a support.
On the derivatives front, we have seen Put writing at 9,000. Moreover, Nifty 9,000 put level consists of the highest OI amongst the Nifty weekly Expiry (23-April) and second highest in the monthly Expiry (30-April), indicating 8,950-9,000 level to act as strong support.
Immediate resistance for Nifty is seen at 9,390. A sustained trade above 9,390 could push Nifty towards the target of 9,800-9,900 levels.
The Advance-decline ratio was positive on BSE for nine out of ten trading days in the month of April. This indicates that the recent rise in the market is not only on the back of short-covering. We believe that outperformance from the mid-caps may continue during the coming week also.
Though the market is passing through the phase of uncertainty as to whether the recent recovery would sustain or not, there are some stocks and sectors, which are showing extraordinary strength in their price movements such as the pharma sector.
Coming back to the benchmark index, we believe that Nifty should hold its support level of 8,950 level for the coming days. Therefore, our advice is to accumulate long positions on decline with the stop loss of 8,950.
On the higher side, if Nifty manages to close above its resistance of 9,400, it could extend the upswing to 9,800-9,900 in the next couple of weeks.
Here are three buy recommendations for the next 3-4 weeks:
BEL | Buy | LTP: Rs 75.45 | Target price: Rs 82 | Stop loss: Rs 71 | Upside: 9%
BEL has broken out from the bullish inverse head and shoulder pattern by closing above the neckline resistance of Rs 73.
The stock has also broken out on the daily chart with higher volumes to close at the highest levels since February 27.
Oscillators and momentum indicators like RSI and MACD are showing strength in the stock on the daily charts.
The short-term trend of the stock is bullish where the stock is trading above its 5 and 20-day SMA.
HPCL | Buy | LTP: Rs 227.20 | Target price: Rs 245 | Stop loss: Rs 215 | Upside: 8%
The stock price has broken out on the daily chart by closing above the resistance level of Rs 222 with higher volumes. It closed at two months high.
MACD has closed above its signal line on the daily chart while the RSI oscillator is forming positive divergence favoring the bulls.
On the derivative front, we have seen long build-up in HPCL.
Exide Industries | Buy | LTP: Rs 150 | Target price: Rs 163 | Stop loss: Rs 143 | Upside: 9%
The stock price has broken out on the daily chart by closing above the resistance level of Rs 147 with higher volumes to close at one month high.
RSI oscillator has been forming positive divergence favoring the bulls. In the derivatives segment, we have seen long build-up in the April futures till now.
(The author is Technical Research Analyst at HDFC Securities)
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