After a week of consolidation, the benchmark index Nifty, on 27th May, witnessed a breakout above its 21-day exponential moving average.
Nifty on the daily chart has witnessed breakout of a smaller degree downward slanting trendline. In the previous week, the index had formed bullish hammer candlestick pattern and it seems to have made short term bottom at 8,800 level.
Market breadth remained in favour of bulls. For every couple of gainers there was one loser. Except for Nifty Media and Pharma, all sectors participated in the rally.
So, we might see some pullback towards 9,450 which is a resistance level capped with a 50- day exponential moving average and if Nifty manages to sustain above the same, then we can expect the continuation of the current pullback towards 9,600 levels. And slip below 8,800 will indicate the breakdown of the trendline.
Banking index has witnessed a sharp oversold rally of almost 7 percent on 27th May. The majority of state-run banks are in the extreme oversold zone so a sharp rally at this level is not a surprise.
The broader structure remains weak as the banking index is underperforming Nifty while trading below its major averages.
The bearish formation will be negated if Bank Nifty takes out 22,000 decisively which is previous swing high. So as long as the banking index trades below these levels, every bounce should be utilised as a selling opportunity.
Here are three trading ideas for the short-term.
Ramco Cements | Buy | LTP: Rs 610 | Target price: Rs 690 | Stop loss: Rs 560 | Upside: 13%
After a prolonged consolidation, Ramco Cements has witnessed a range breakout on the daily and weekly time frame.
Currently, prices are trading above its smaller degree horizontal trendline support, looking to accelerate higher on the daily chart.
Momentum oscillator RSI (14) is reading above 60 levels on the daily chart with positive crossover on the cards.
However, for the last few days, prices have been consolidating between its 21 and 50-day exponential moving average that is placed at Rs 540 and Rs 580, respectively.
In the current week, the stock has broken its moving average range on the higher side, which is positive for the counter.
Traders can accumulate the stock in the range of Rs 605 – 612 for the target of Rs 690 with a stop loss below Rs 560 on a daily closing basis.
Maruti Suzuki India | Buy | LTP: Rs 5,220 | Target price: Rs 5,600 | Stop loss: Rs 5,050 | Upside: 7%
On the daily chart, the stock has witnessed a falling wedge pattern breakout and is trading above its trendline support.
Momentum oscillator RSI (14) is reading above 55 levels on the daily chart with positive crossover on the cards.
However, for the last few days, prices have been consolidating within a 21-day exponential moving average that is placed at Rs 5,000, respectively.
In the previous two trading sessions, the stock has broken its moving average range on the higher side, which is positive for the counter.
On the weekly chart, the stock has taken support at 61.80 percent Fibonacci retracement at Rs 4,600 from its intermediate low of Rs 4,001 to its intermediate high of Rs 5,602.
The overall daily and weekly chart structure looks promising to move higher.
Traders can accumulate the stock in the range of Rs 5,235–5,250 for the target of Rs 5,600 with a stop loss below Rs 5,050 on a daily closing basis.
Torrent Pharmaceuticals | Sell | LTP: Rs 2,405 | Target price: Rs 2,175 | Stop loss: Rs 2,525 | Downside: 10%
On the weekly chart, Torrent Pharmaceuticals has formed a bearish engulfing candlestick pattern, which indicates profit-booking on the cards.
Momentum oscillator RSI (14) is reading below 55 levels on the daily chart with negative crossover on the cards.
Prices have drifted below its 21-day exponential moving average on the daily chart and witnessed a smaller degree trend line breakdown.
Traders can short the stock in the range of Rs 2,390-2,410 for the target of Rs 2,175 with a stop loss above Rs 2,525 on a daily closing basis.
(The author is Technical Analyst, Bonanza Portfolio)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.