Nandish Shah, Senior Derivative & Technical Analyst at HDFC Securities
The Nifty continued its northward journey for the third session in a row on May 30 on the back of strong global cues, where it surged over 300 points to close at 16,661 levels - the highest since May 5.
The Nifty has broken out from the downward sloping trendline adjoining the highs of April 4 and April 29, 2022. Moreover, it closed above the previous swing high of 16,414, indicating short term trend turned positive.
Momentum oscillators like RSI (relative strength index) and MFI (money flow index) are showing strength as they have witnessed breakout from the downward sloping trendline.
In the Index Futures segment, FIIs have created fresh longs during the last couple of weeks, where their net long to short ratio has moved up to 0.93 level from 0.20 levels on May 12. In the Option segment, we have seen aggressive Put writing at 16,400-16,500 levels. This level also coincides with the previous swing high of 16,400. Therefore, we believe that short term trend will remain bullish till Nifty is trading above 16,400 levels.
Nifty Midcap and smallcap Indices have outperformed the benchmark indices on Monday. As result season is over now, we expect them to outperform during coming weeks and therefore focus of the traders should be on the midcaps to generate higher returns we believe.
To conclude, short term trend has turned positive for the Nifty. Immediate target for Nifty is seen around 16,800 levels, followed by 17,100 levels. Longs should be protected with stop-loss of 16,400 levels.
Here are three buy calls for next 2-3 weeks:
VIP Industries: Buy | LTP: Rs 579 | Stop-Loss: Rs 540 | Target: Rs 650 | Return: 12 percent
Primary trend of stock is positive as it is trading above its 100 and 200 weeks moving averages. During the recent correction, stock price has taken support at the upward sloping trendline on the weekly chart.
Stock price has formed Bullish Hammer candlestick pattern on the weekly chart. It has formed triple bottom around Rs 515 levels on the daily chart suggesting strong support around those levels.
Union Bank of India: Buy | LTP: Rs 37.9 | Stop-Loss: Rs 36 | Target: Rs 42 | Return: 11 percent
Short term trend of the stock turned bullish as it closed above its 5 and 20 days EMA (exponential moving average). Stock price has formed higher top higher bottom formation on the daily chart.
Momentum oscillators like RSI and MFI have exited from the oversold zone and started sloping upwards, suggesting higher possibility of bullish trend reversal in stock price in the coming days. Stock price has corrected nearly 25 percent from the recent high which we believe is a buying opportunity for the short term.
DCB Bank: Buy | LTP: Rs 84 | Stop-Loss: Rs 80 | Target: Rs 94 | Return: 12 percent
Short term trend of the stock is bullish as it is trading above its 5 and 20 weeks EMA. Stock price is on the verge of breaking out from the symmetrical triangle on the weekly chart.
RSI oscillator has bounced back from the 30 odd levels and started rising, suggesting higher possibility of bullish trend reversal in stock price in the coming days.
Bank Nifty has broken out from the downward sloping trendline and we expect bullishness to spill over in the midcap banking stocks in the days to come.
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